Merck announces €14.6 billion takeover offer for Schering

By Lisa Kerner

Erie, Pa., March 13 - Merck KGaA said is making a public takeover offer to Schering AG shareholders with the goal of creating a world-class pharmaceuticals and chemicals company with combined pro-forma annual revenues of €11.2 billion.

According to a company news release, Merck will offer €77 in cash for each Schering share or American Depositary Share (ADS), representing a total equity value of €14.6 billion.

The offer price represents a 35% premium to the three-month average unaffected share price and 24% more than the unaffected share price, the release stated.

"This is an ideal combination for both companies," Merck chairman Michael Roemer said in the release.

"It provides both companies with the unique opportunity to take a quantum leap and become more competitive and continue to thrive in the consolidating global pharmaceuticals industry."

The two companies will have combined ethical pharmaceutical sales of €5.6 billion in 2005 and a combined research and development budget of €1.3 billion, as well as an enhanced product pipeline with more than 30 projects in clinical development.

Merck said it expects the transaction to have a positive impact on adjusted earnings per share. The tender offer will be initially funded through existing Merck cash and bridge financing facilities provided by Bear Stearns, Deutsche Bank and Goldman Sachs.

The total cash consideration of €14.6 billion will be refinanced through a combination of existing Merck funds, debt and equity.

The offer will be subject to customary conditions and a minimum acceptance threshold of 51% of Schering's share capital at the end of the acceptance period.

Merck is a global pharmaceutical and chemical company.

Schering is a Berlin, Germany, pharmaceutical company.

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