Business | General
US, French firms merge units
Sanofi-Aventis and Merck create company with 29% market share
- By Andrew Jack, Financial Times
- Published: 00:00 March 10, 2010
London: Sanofi-Aventis of France and Merck of the US on Monday agreed to combine their animal health operations, creating a joint venture with almost $5.3 billion (Dh19.46 billion) in annual sales and a 29 per cent share of the market.
Pending regulatory approval, the combined company, with an enterprise value calculated at $16.5 billion, will offer products for livestock, other agricultural animals and pets. The sector, which generates annual sales of $18 billion, is growing at about 5 per cent a year.
It marks efforts by both large pharmaceutical groups to diversify risk and activities away from pure human patented medicines into broader healthcare products.
The deal follows an agreement last year under which Sanofi-Aventis bought out Merck from Merial, their existing animal health joint venture, after Merck purchased Schering-Plough for $41 billion in 2009 and acquired the Intervet/Schering-Plough animal health division in the process. This deal is still subject to regulatory approval.
Difference in valuation
Sanofi-Aventis has agreed to pay the minimum $1 billion discussed with Merck last year to recombine their assets after a restructuring triggered by Merck's takeover of Schering-Plough.
At the time of the Schering-Plough deal, Sanofi-Aventis agreed that any recombination of the enlarged business would incur a payment of $750 million plus any difference in valuation of the two partners' operations. Intervet/Schering-Plough was subsequently valued at $8.5 billion, compared with $8 billion for Merial.
"The upcoming combination of Merial and Intervet/Schering-Plough is an exciting opportunity for Sanofi-Aventis to create with Merck a leading company in the animal health sector," said Christopher Viehbacher, chief executive of Sanofi-Aventis.
"I am convinced that, together, we will create strong value in bringing broader and improved offerings in both pet and production animal segments. This transaction represents another consistent milestone in our diversification strategy to bring sustainable growth to Sanofi-Aventis."
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