French pharmaceutical company Sanofi-Aventis will acquire Merck's interest in animal health company Merial, the companies announced on Thursday, July 30.
The companies signed a definitive agreement under which Merck will sell its 50% interest in the companies' current animal health joint venture, Lyon, France-based Merial, to Sanofi-Aventis for US$4 billion in cash.
A decision about the future of Merial was expected since Merck and Schering-Plough announced a merger in early March. The companies' animal health divisions (Merial and Intervet/Schering-Plough Animal Health) are both seeded in the global animal health top-three – and a combined animal health division will be the world's largest with a combined turnover of more than $5 billion annually.
Formed in 1997, Merial is an animal health company that is a 50/50 joint-venture between Merck, headquartered in Whitehouse Station, NJ, USA and Sanofi-Aventis, which is located in Lyon, France. Following the close of the transaction, Sanofi-Aventis will own 100% of Merial.
Merck, Sanofi-Aventis and Schering-Plough also announced a call option agreement, which would include that 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, CEO, Sanofi-Aventis said: "We are pleased with the acquisition of Merial, a major global player in animal heath, and the possibility of combining Merial and Intervet/Schering-Plough's complementary businesses. The combination would create a new leader in this US$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 finalised, 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 US$8 billion.
The companies said Merial and Intervet/Schering-Plough Animal Health will continue to operate independently until the closing of any potential combination of Merial and Intervet/Schering-Plough Animal Health.