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Merck launches bid for Schering

German pharmaceutical major Merck launched a hostile bid on Monday for Berlin-based drug company Schering.

india Updated: Mar 14, 2006 11:39 IST

German pharmaceutical major Merck launched a hostile bid on Monday for Berlin-based drug company Schering, which saw a surge in the latter's shares by 21.8 per cent to 81.35 euros ($97).

The 14.6 billion euros offer values Schering shares at 77 euros, which is about 15 per cent more than Friday's closing price.

"This is an ideal merger for both companies," said Merck chairman Michael Roemer.

Analysts say that a fusion between the two groups could bolster their global market strength.

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

But Schering's chief Hubertus Erlen rejected the offer on Sunday, insisting it was too low, with analysts also saying that other groups could launch bids resulting in a bidding war to buy Schering.

"We are convinced that this offer is not attractive," Erlen stated.

Merck has been building up a stake in Schering and already owns 4.98 percent of its rival.

Merck's shares fell by 1.3 per cent to 82.62 euros after it unveiled the offer to buy Schering, which is the world's biggest manufacturer of contraceptive pills.

Based on the latest year's figures, a merged Merck-Schering group would have combined sales of 11.2 billion euros.

Merck, which is majority owned by the Merck family, said it expects annual synergies of about 500 million euros with the amount rising after 2009.

Both firms have roughly the same size workforce. While Merck, which is known for its cancer and heart disease medications, has about 29,000 employees, Schering has about 25,000.

Merck supervisory board Chairman Wilhelm Simson ruled out breaking up the Berlin-based Schering in the event of a successful bid.

"A break-up would be absurd," he said, with Merck saying that the two groups' business would complement each other.

Simson said that the two groups had held discussions but had not brought the desired result from Merck's point of view.

First Published: Mar 13, 2006 18:24 IST