Merck deal targeted for November close; Sprint stock up on bid rumors; Patheon snubs JLL

By Cristal Cody

Tupelo, Miss., Sept. 14 - Merck & Co., Inc. and Schering-Plough Corp.'s $41.1 billion transaction could close in early November if the European Union's Competition Commission approves the deal after an initial review, a market source said Monday.

In other situations, Kraft Foods Inc. stayed quiet after Cadbury plc again rejected its buyout offer in a letter released publicly over the weekend.

Meanwhile on Monday, shares of Sprint Nextel Corp. climbed 10% on speculation the company may be acquired by Deutsche Telekom AG.

Also on Monday, Patheon Inc. said that due diligence discussions are ongoing for a buyout offer that has already been rejected by its largest shareholder.

On Wall Street, stocks edged up.

The Dow Jones Industrial Average rose 21.39 points, or 0.22%, to 9,626.80.

The Standard & Poor's 500 index added 6.61 points, or 0.63%, to close at 1,049.34, while the Nasdaq Composite index closed up 10.88 points, or 0.52%, at 2,091.78.

Fall close likely for Merck

In addition to antitrust clearance in Europe, Merck and Schering-Plough's combination also requires approval from the U.S. Federal Trade Commission and regulators in Brazil and Japan.

"The E.U. has not referred a mega pharma deal to a phase 2 review since 1998, probably because remedies are easy to structure and are straightforward in this space," the source said. "We are targeting clearance by the FTC by the end of September."

Merck and Schering-Plough expect the transaction to close in the fourth quarter.

Shareholders of Whitehouse Station, N.J.-based Merck and Kenilworth, N.J.-based Schering-Plough approved the acquisition in August.

Under the terms of the agreement, Schering-Plough shareholders will receive 0.5767 of a share of new Merck stock and $10.50 in cash for each share of Schering-Plough. For Merck shareholders, existing Merck shares will represent an equal number of shares in the new combined company.

Schering-Plough's stock added 18 cents, or 0.63%, to close Monday at $28.68.

Merck shares rose 35 cents, or 1.08%, to $32.89.

Kraft stays mum

A Kraft spokesman told Prospect News the company had no comment on Cadbury's release of the letter, especially since there's "nothing new in that letter."

In a letter to Kraft chairman and chief executive officer Irene Rosenfeld released Saturday, Cadbury chairman Roger Carr said a deal with Kraft presents an "unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company. We have a clear set of targets, a track record of delivery accepted by the market and value enhancing plans to further exploit our proven growth platforms."

Uxbridge, England-based Cadbury's brands include the Cadbury Crème Eggs, Green & Black's chocolate candy and Dentyne and Trident gums.

Northfield, Ill.-based Kraft's offer was valued at £10.2 billion, or 300p and 0.2589 of a share of Kraft for every share of Cadbury.

Kraft shares crept up 1 cent, or 0.04%, to $26.11.

Cadbury's shares rose 2.28p, or 0.29%, to 777.78p. Its U.S.-listed shares gained 34 cents, or 0.66%, to close at $52.16.

Sprint stock up on deal talk

Sprint shares closed up 38 cents, or 10.08%, at $4.15 on Monday on media reports of a potential buyout offer from German telecommunications firm Deutsche Telekom.

Sprint spokesman James Fisher said Monday the Overland Park, Kan.-based company does not comment on rumors or speculation.

A deal would combine the nation's No. 3 mobile carrier with Deutsche Telekom's subsidiary, T-Mobile USA.

A transaction with the No. 4 mobile carrier in the country would offer some competition to AT&T, Inc. and Verizon Wireless, a joint venture between New York-based Verizon Communications Inc. and U.K.-based Vodafone Group plc, but market observers say the acquisition would be difficult to integrate for customers and employees.

Deutsche Telekom shares slipped 8 cents, or 0.58%, to $13.79 on Monday.

Vodafone's stock fell 11 cents, or 0.47%, to $23.09, while Verizon shares lost 19 cents, or 0.61%, to close at $31.07.

Shares of Dallas-based AT&T shed 13 cents, or 0.49%, to end at $26.53.

Patheon takes its chances

Patheon said Monday discussions are ongoing with Lonza Group AG, despite a shareholder's assurances that a deal can't be done without its approval.

Lonza has offered Patheon about $450 million, or $3.55 a share, but the bid was rejected by majority shareholder JLL Partners, Inc.

New York private equity investment firm JLL owns about 57% of the company's outstanding stock.

Basel, Switzerland-based Lonza's proposal requires at least 67% of outstanding shares to accept the offer.

On a conference call with analysts on Monday to discuss Patheon's fiscal third-quarter results, Patheon president and CEO Wes Wheeler said Lonza is continuing due diligence on the Research Triangle Park, N.C.-based prescription drug and packaging manufacturer.

"They are, and we are, supporting the process," Wheeler said. "We're not able to discuss the details of this process today, nor will we speculate on the possible outcome."

Lonza has an exclusive negotiation period with Patheon through Sept. 30.

Patheon said it lost $6 million, or 11 cents a share, in the quarter ended July 31, compared with a loss of $14 million, or 15 cents a share, for the same period last year.

Revenue fell 15.70% to $164.4 million, compared with $195 million in the fiscal third quarter last year.

Patheon shares fell C$0.11, or 3.68%, to C$2.88 on Monday.

Lonza's stock declined 0.09% to CHF 109.50.

Mentioned in this article:

AT&T, Inc. NYSE: T

Cadbury plc London: CBRY; NYSE: CBY

Deutsche Telekom AG NYSE: DT

Kraft Foods Inc. NYSE: KFT

Lonza Group AG Swiss: LONN

Merck & Co., Inc. NYSE: MRK

Patheon Inc. Toronto: PTI

Schering-Plough Corp. NYSE: SGP

Sprint Nextel Corp. NYSE: S

Verizon Communications Inc. NYSE: VZ

Vodafone Group plc NYSE: VOD

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