Merck & Co., Inc. (MRK) said Tuesday that french drug maker Sanofi-aventis (SNY) exercised its option to combine Sanofi's Merial with Intervet/Schering-Plough, Merck's Animal Health business. Upon completion of the deal, the equally-owned joint venture is expected to be a global leader in Animal Health, it said in a statement.
Merck said that for the next 5 years, worldwide animal health market is projected grow at 5% per year, as demand for animal proteins and companion animal health care needs are on the rise. In 2008, it reached $19 billion, of which products for production animals accounted for 60% and products for companion animals accounted for 40%.
Subject to execution of final agreements, antitrust review in the U.S., Europe and other countries and other customary closing conditions, the transaction is expected to conclude in about 12 months. Both Merial and Intervet/Schering-Plough will continue to operate independently until the closing of the transaction. All payments, including adjustments for debt and certain other liabilities will be made upon closing of the transaction.
Sanofi's true-up payment to Merck in this transaction is $250 million. The entreprise value of Merial has been fixed at $8 billion and that of Intervet/Schering-Plough at $8.5 billion. As per the terms of the agreement signed on July 29, 2009, an additional $750 million would be payable by Sanofi-aventis.
The new joint venture is set to offer a broader portfolio of animal health products and services in pharmaceuticals and biologics, as well as the ability to capitalize on growth opportunities in all fields and countries around the world, with an attractive geographical network of global technology and expertise. It is expected to cater to broadest portfolios of animal health products and services in pharmaceuticals and biologics for millions of customers who include farmers, veterinarians and pet owners.
Merial, formed in 1997, is an animal health company that was a 50/50 joint venture between Merck and Sanofi-aventis. In 2009, Sanofi-aventis acquired Merck's interest in Merial for a cash consideration of $4 billion.
Intervet/Schering-Plough Animal Health of Boxmeer, the Netherlands, is a fully owned business unit of Merck, engaged in research, development, manufacturing and marketing of animal health products.
Monday, MRK closed regular trading at $37.35 and SNY finished at $38.15, on the NYSE.
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