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Buying rival to cost Merck US$41.1b

MERCK & Co has agreed to buy rival United States drug maker Schering-Plough Corp for US$41.1 billion in cash and stock to get a larger experimental pipeline and products unhindered by imminent patent losses.

Schering-Plough holders will get US$23.61 a share, a 34-percent premium to the closing stock price last week, the companies said.

"It clearly is a year of mergers for pharmaceutical companies," said Philippe Lanone, an analyst at Natixis Securities in Paris. "They don't have much of a choice if they are to guarantee EPS growth in the years to come."

Schering-Plough has medicines in late-stage testing that may generate more than US$6 billion in annual sales, the company said in November. Last month, Schering-Plough's earnings beat analyst estimates after it added sales from its acquisition of Organon BioSciences and reduced costs.

Under the terms of the deal, Schering-Plough shareholders will receive 0.5767 shares and US$10.50 in cash for each share of Schering-Plough. The cash portion will be financed with a combination of US$9.8 billion from existing cash balances and US$8.5 billion from financing to be provided by JPMorgan Chase & Co.

The price represents a premium of about 44 percent based on the average closing price of the two stocks over the past 30 trading days.

Merck shareholders are expected to own about 68 percent of the combined company, and Schering-Plough shareholders about 32 percent.

Schering-Plough co-markets anti-inflammatory drug Remicade with J&J, and developed cholesterol pills Vytorin and Zetia with Merck, Bloomberg News said.

Schering-Plough's most promising treatment in development, TRA, is designed to prevent blood clots with fewer side effects than older drugs and could come on the market as early as 2011.


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