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Schering Shares

Merck's threat to derail Bayer's acquisition of Schering is resolved

by Patricia Short
June 19, 2006 | A version of this story appeared in Volume 84, Issue 25

What looked like a story that would turn into a long-running saga, with the anticipated merger of two German drugmakers being spoiled by a third, was resolved on the last day possible. Germany's Merck, which had acquired a 21.8% stake in Schering and thus threatened Bayer's agreement to acquire Schering, agreed to offer its stake to Bayer. The agreement followed talks between Bayer and Merck and a lawsuit filed by Bayer against Merck, which will be withdrawn.

The Merck stake, combined with the roughly 60% holding that Bayer already had, takes Bayer comfortably over the 75% target it had to attain by the end of the day on June 14. Until Merck made the decision to offer its stake to Bayer, reaching that goal had looked unlikely. Now, however, Bayer can complete its acquisition of Schering, as agreed upon in March when white knight Bayer outbid Merck's hostile offer for the Berlin-based pharmaceutical company.

Merck began buying Schering shares on the stock market on June 9, in what it subsequently said was a move to secure its long-term strategic interest in Schering. That action effectively forced Bayer to start snapping up shares. By June 13, Bayer had purchased or been offered only about 60% of Schering's shares, hence its decision to sue Merck in U.S. District Court in New York City for damages and to force Merck to divest its shares.

Bayer is buying the Merck stake for 89 euros (roughly $115) per share, so it will pay the same price—effectively a 3.4% increase on its agreed-upon bid—for shares already purchased and those still outstanding.


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