Sanofi-aventis to Acquire Merck's Interest in Merial
Agreement includes option for sanofi-aventis to combine Merial with Intervet/Schering-Plough Animal Health in new equally owned joint venture with the new Merck
Future joint venture would be a global leader in animal health
PARIS, FRANCE, WHITEHOUSE STATION, N.J. and KENILWORTH, N.J., July 30, 2009 - Sanofi-aventis (EURONEXT: SAN and NYSE: SNY) and Merck & Co., Inc. (NYSE: MRK) today announced that the companies have signed a definitive agreement under which Merck will sell its 50 percent interest in the companies' current animal health joint venture, Merial Limited (Merial), to sanofi-aventis for $4 billion (US) in cash. Formed in 1997, Merial is a leading animal health company that is a 50/50 joint venture between Merck and sanofi-aventis. Following the close of the transaction, sanofi-aventis will own 100 percent of Merial.
Sanofi-aventis said the acquisition price values Merial on the basis of 3.0 x 2008 sales and 10.2 x 2008 earnings before interest and taxes (EBIT). The acquisition is expected to be accretive to sanofi-aventis' adjusted net income from the first year.
In addition to the Merial agreement, Merck, sanofi-aventis and Schering-Plough announced the signing of a call option agreement. Under the terms of the call option agreement, following the closing of the Merck/Schering-Plough merger, sanofi-aventis would have an option to combine the Intervet/Schering-Plough Animal Health business with Merial to form an animal health joint venture that would be owned equally by the new Merck and sanofi-aventis.
"These agreements should enable us to proceed expeditiously with the closing of our merger with Schering-Plough in the fourth quarter as planned, and also gain an outstanding animal health business through Intervet/Schering-Plough Animal Health," said Richard T. Clark, Merck chairman, president and chief executive officer. "We are pleased that our long-time partner sanofi-aventis will purchase Merck's interest in Merial, the successful joint venture we built together," he added. "We look forward to the potential opportunity to bring together the strong animal health businesses of sanofi-aventis and the new Merck."
Commenting on these agreements, Christopher A. Viehbacher, Chief Executive Officer of sanofi-aventis said: "We are pleased with the acquisition of Merial, a major global player in animal health, and the possibility of combining Merial and Intervet/Schering-Plough's complementary businesses. The combination would create a new leader in this USD 19 billion global animal health market, supporting our vision of a global diversified healthcare leader. In an environment of increasing complexity, I am convinced that alliances have an important place and I look forward to the prospect of further partnering with the new Merck in animal health to build on our longstanding relationship."
The sale of Merck's interest in the Merial joint venture is subject to clearance by the European antitrust authorities. Merck said it anticipates completing the transaction before its planned merger with Schering-Plough is finalized, which is expected to occur during the fourth quarter of 2009. Following the close of Merck's merger with Schering-Plough, sanofi-aventis would have an opportunity to conduct due diligence before any exercise of its call option to form the new joint venture.
As part of the call option agreement, the value of Merial has been fixed at $8 billion (US). The minimum total value received by the new Merck and its affiliates by contributing Intervet/Schering-Plough to the combined entity would be $9.25 billion (US), consisting of a floor valuation of Intervet/Schering-Plough of $8.5 billion (US) (subject to potential upward revision based on a valuation exercise by the two parties) and an additional payment of $750 million (US). Based on the valuation exercise of Intervet/Schering-Plough and customary transaction adjustments, if Merial and Intervet/Schering-Plough are combined, a true-up payment would be paid to establish a 50/50 joint venture with equal ownership between the new Merck and sanofi-aventis. Any formation of a new animal health joint venture with sanofi-aventis is subject to customary closing conditions including antitrust review in the United States and Europe.
Between September 30, 2009 and the closing of the merger between Merck and Schering-Plough, the agreements provide Merck with certain rights to terminate the option for a fee of $400 million or $600 million (US).
Forward Looking Statements by Sanofi-aventis
Forward Looking Statements by Schering-Plough
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental and self-regulatory organization approvals of the merger on the proposed terms and schedule; the failure of Schering-Plough or Merck stockholders to approve the merger; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions; the ability to obtain governmental approvals of the sale of Merck's interest in Merial to sanofi-aventis; and the failure of sanofi-aventis to exercise the call option. Schering-Plough undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Schering-Plough's Quarterly Report on Form 10-Q for the period ended June 30, 2009, the merger proxy statement/prospectus filed June 25, 2009, and Schering-Plough's other filings with the Securities and Exchange Commission (the "SEC") available at the SEC's Internet site (www.sec.gov).
Forward Looking Statements by Merck
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from the proposed merger of Merck and Schering-Plough will not be realized, or will not be realized within the expected time period, due to, among other things, the impact of pharmaceutical industry regulation and pending legislation that could affect the pharmaceutical industry; the ability to obtain governmental and self-regulatory organization approvals of the merger on the proposed terms and schedule; the actual terms of the financing required for the merger and/or the failure to obtain such financing; the failure of Schering-Plough or Merck stockholders to approve the merger; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions; Merck's ability to accurately predict future market conditions; dependence on the effectiveness of Merck's patents and other protections for innovative products; the risk of new and changing regulation and health policies in the U.S. and internationally and the exposure to litigation and/or regulatory actions. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck's 2008 Annual Report on Form 10-K, Current Report on Form 8-K filed on June 22, 2009, Merck's other filings with the Securities and Exchange Commission (the "SEC") available at the SEC's Internet site (www.sec.gov).