Merck KGaA to buy Serona and Altana for $19B
Merck KGaA to buy Serona and Altana for $19B
Merck KGaA to buy Serona and Altana for $19B
Midsize European drug makers unveiled two deals, valued at a total of more than €15 billion, or $19 billion, that underscored the pressure building on these companies to grow to stay competitive with industry titans.
German drug maker Merck KGaA agreed to buy Swiss biotechnology company Serono SA for €10.6 billion. A few hours later,
Midsize drug companies have found it hard to compete with the likes of Pfizer Inc. and GlaxoSmithKline
Merck, which isn't affiliated with the American drug maker of the same name, is 73%-controlled by the Merck family of
Merck said the deal would transform its pharmaceuticals division, creating a "critical mass in research and development," with a combined total of 28 compounds in development. Merck said it would combine its prescription-drug business with Serono's and call it Merck-Serono Biopharmaceuticals, with global headquarters in
By buying Serono, Merck will gain a larger foothold in the
Both Merck and Serono have been on the sidelines in recent months after failed attempts to consolidate with other companies. Serono put itself up for sale late last year but didn't seal a deal with any buyers. In April, Serono Chief Executive Ernesto Bertarelli said the company was taking itself off the block and seeking acquisition opportunities instead.
Merck lost a battle with Bayer AG earlier this year for control of fellow German drug company Schering AG. In March, Merck ruled out a bid for Serono. But Merck's chief financial officer, Michael Becker, told analysts on a conference call yesterday that the company changed its mind after a bidding war failed to develop for the Swiss firm. "We were expecting a competition between the big pharma firms with the deep pockets," he said.
Altana, based in
Nycomed, based in
The need to pool resources and products has motivated other European drug mergers in recent years, including Bayer's $21.3 billion purchase of Schering this year, and Belgium-based UCB SA's $2.7 billion takeover of Celltech Group
Serono's biggest product is its Rebif treatment for multiple sclerosis, which accounted for 49% of its sales in 2005. Its other main franchise is infertility treatments, with its Gonal-f generating 21% of sales. Merck sells cancer therapies, including the bowel-cancer drug Erbitux, and treatments for cardiovascular diseases and diabetes.
Shares in Merck fell 4.7% to €74.70 in
Analyst views on the Merck-Serono deal were mixed. Some said the combination appeared to be a sign of desperation for both companies after they failed to find other merger partners.
"The synergies between the two pharmaceutical businesses look minimal, as there is very little product overlap, and even in marketing, the Serono sales force is highly specialized and therefore unsuitable to be used for more general therapeutic areas," Andrew Fellows, an analyst with Helvea, said in a note to clients.
But other analysts said that by combining their research budgets, the companies would improve the chance of discovering new drugs.
Merck said it will finance the deal initially through existing cash and a loan. The all-cash transaction will be refinanced through a combination of a syndicated loan, a bond and a capital increase of €2 billion to €2.5 billion, in which the Merck family will participate with an amount of €1 billion.
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