Merck in €14.9b bid to create German drug giant

FRANKFURT - Shares of Schering, the world's largest maker of contraceptives, may rise after the company said Merck made an unsolicited €14.9 billion ($27.8 billion) cash bid to create Germany's second-biggest drugmaker.

Merck, controlled by the Merck family, will offer €77 a share, Schering said yesterday.

Schering chief executive Hubertus Erlen said his board did not plan to recommend the bid, which is 15 per cent more than Berlin-based Schering's €66.86 closing price last week.

"It makes sense because both Merck and Schering are too small to compete," Alexander Groschke, head of equities research at Landesbank Rheinland-Pfalz, said. Groschke said Merck shares might also rise if investors thought the takeover would bring stronger growth.

"Sentiment is good for mergers and acquisitions at the moment."

Schering would bring Darmstadt-based Merck closer to larger German competitor Bayer, the maker of aspirin. Mid-sized drugmakers are seeking mergers as they fight to keep down the cost of product development.

The Merck purchase would be the largest in the German branded pharmaceuticals market since 1998, when Hoechst and Rhone-Poulenc merged drugs and crop treatments businesses to form Aventis.

Aventis was later purchased by French rival Sanofi-Synthelabo, creating the world's third-largest drugmaker.

The Merck family didn't plan to sell a stake in the company to finance the acquisition, a source said. The 130 members of the Merck family together own around 73 per cent of the company.

- BLOOMBERG