Merck on Monday agreed to acquire Schering-Plough for $41 billion in a deal that promises to diversify the pharmaceutical giant’s position beyond its blockbuster drugs.
Whitehouse Station, New Jersey-based Merck’s board of directors approved the $23.61 per share cash-and-stock transaction, a 34 percent premium over Schering-Plough’s stock price on March 6.
The combination “better positions MRK to navigate its patent expirations and improves its long-term growth rate,” Citi analyst John Borris wrote on Monday to clients.
The move comes as Merck’s blood pressure drugs Cozaar and Hyzaar are set to expire in 2010 and its allergy medication Singulair is set to expire in 2012, Citi’s pharmaceuticals analyst noted.
Shares of Kenilworth, New Jersey, Schering-Plough jumped 14 percent on the deal while Merck plunged 7.7 percent.
The acquisition would bring to 18, or double, the number of potential drugs Merck has under phase III development, according to the company.
"The combined company will benefit from a formidable research and development pipeline, a significantly broader portfolio of medicines and an expanded presence in key international markets, particularly in high-growth emerging markets,” Merck CEO Richard Clark said in a statement.
The merger marks the second sizable pharmaceutical marriage of the year. Pfizer agreed to buy Wyeth for $68 billion in January as the two came increasingly under pressure from makers of generic drugs.
Under the Merck-Schering-Plough agreement, the companies hope to save $3.5 billion a year as they integrate operations.