Combined Company Positioned for Sustainable Growth Through Scientific Innovation and a Stronger, More Diversified Product Portfolio
WHITEHOUSE STATION, N.J. & KENILWORTH, N.J.--(BUSINESS WIRE)--Merck & Co., Inc. (NYSE: MRK) and Schering-Plough Corporation (NYSE: SGP) today announced that their Boards of Directors have unanimously approved a definitive merger agreement under which Merck and Schering-Plough will combine, under the name Merck, in a stock and cash transaction. Under the terms of the agreement, Schering-Plough shareholders will receive 0.5767 shares and $10.50 in cash for each share of Schering-Plough. Each Merck share will automatically become a share of the combined company. Merck Chairman, President and Chief Executive Officer Richard T. Clark will lead the combined company.
Based on the closing price of Merck stock on March 6, 2009, the consideration to be received by Schering-Plough shareholders is valued at $23.61 per share, or $41.1 billion in the aggregate. This price represents a premium to Schering-Plough shareholders of approximately 34 percent based on the closing price of Schering-Plough stock on March 6, 2009. The consideration also represents a premium of approximately 44 percent based on the average closing price of the two stocks over the last 30 trading days.
Upon closing of the transaction, Merck shareholders are expected to own approximately 68 percent of the combined company, and Schering-Plough shareholders are expected to own approximately 32 percent. Merck anticipates that the transaction will be modestly accretive to non-GAAP EPS1 in the first full year following completion and significantly accretive thereafter.
“We are creating a strong, global healthcare leader built for sustainable growth and success,” said Mr. Clark. “The combined company will benefit from a formidable research and development pipeline, a significantly broader portfolio of medicines and an expanded presence in key international markets, particularly in high-growth emerging markets. The efficiencies we gain will allow us to invest in strategic opportunities, while creating meaningful value for shareholders.
“We look forward to joining forces with an outstanding partner we know well and that shares our commitment to patients, employees and the communities where we work and live. Through their talent and dedication, Schering-Plough employees have built an industry leading R&D engine and late-stage pipeline that is complementary to our own. We are confident that, together, Merck and Schering-Plough will make a meaningful difference in the future of global healthcare,” Mr. Clark added.
Fred Hassan, chairman and chief executive officer of Schering-Plough, said, “Over the last six years, Schering-Plough colleagues have transformed our company into a strong competitor in the global pharmaceutical industry. We have built a strong, diverse business and a robust pipeline that offers hope to patients who are waiting for new medicines. I am proud of what we have accomplished. Our success is a testament to the hard work and dedication of our colleagues in every country. We are joining forces with Merck, our long-term partner in our cholesterol joint venture, to create a dynamic new leader in the pharmaceutical industry. By harnessing the strengths of both companies, the combined entity will be well-positioned to further deliver on our shared goal of discovering new therapies for patients to help them live healthier, happier lives.”
“The talent and dedication of Schering-Plough scientists has helped to build an outstanding clinical development pipeline,” said Peter S. Kim, Ph.D., Merck executive vice president, and president of Merck Research Laboratories. “Schering-Plough's considerable biologics expertise will complement Merck's novel proprietary biologics platform and aligns with our commitment to build a powerful biologics presence. The Schering-Plough and Merck pipelines are remarkably complementary and will greatly increase our ability to deliver important new medicines to patients. I believe the combined pipeline will be the best in the industry, by far.”
Strategic Benefits of the Transaction
Financial Benefits of the Transaction
Leadership and Integration
Following the close of the transaction, the Board of Directors of the combined company will be comprised of the Merck Board and three representatives from Schering-Plough’s Board. Richard T. Clark will serve as chairman, president and chief executive officer of the combined company. Fred Hassan, chairman and chief executive officer of Schering-Plough, is committed to continuing the strong operations at Schering-Plough and intends to participate in the integration planning until the close.
Merck’s integration team will be led by Adam Schechter, president of Global Pharmaceuticals, who will report to Mr. Clark. Schering-Plough’s integration team will be led by Brent Saunders, senior vice president and president, Consumer Health Care, who will report to Mr. Hassan. A key priority is keeping the best talent from both companies. Recognizing that the combination will result in a much larger organization, Merck expects that the substantial majority of Schering-Plough employees will remain with the combined company. In addition, both Merck and Schering-Plough will institute hiring freezes immediately.
The combined company will have its corporate headquarters in Whitehouse Station, NJ.
Financing
The aggregate consideration will be comprised of a combination of approximately 44 percent cash and 56 percent stock. The cash portion will be financed with a combination of $9.8 billion from existing cash balances and $8.5 billion from committed financing to be provided by J.P. Morgan.
Transaction Structure
The transaction will be structured as a "reverse merger" in which Schering-Plough, renamed Merck, will continue as the surviving public corporation. The exchange ratio was calculated based on an agreed price of $26.25, with $10.50 in cash and $15.75 in Merck stock, based on a trailing thirty day volume weighted average price of $27.3109. Effective upon the merger, each Merck share will automatically become a share of the combined company. The receipt of shares by Schering-Plough shareholders and the conversion of Merck shares into combined company shares under the transaction is intended to be tax free for U.S. federal income tax purposes. Schering-Plough shareholders will be subject to tax on the cash received up to the amount of gain realized on the shares exchanged.
Guidance
Merck reaffirmed its expectations for full-year 2009 revenue (as reported by Merck & Co., Inc.) to be in the range of $23.7 billion to $24.2 billion. As previously disclosed, based on current information, revenues are likely to be in the lower half of the range. The company also reiterated its expectations for 2009 non-GAAP EPS to range from $3.15 to $3.30, excluding certain items, and a 2009 GAAP EPS range of $2.95 to $3.17. The 2009 GAAP EPS guidance includes a pretax charge of approximately $400 million to $600 million associated with the company's global restructuring program. This guidance excludes any impact from this transaction, which is expected to close in the fourth quarter.
Merck is targeting a high single digit non-GAAP EPS1 compound annual growth rate from 2009 (2009 base represents Merck's stand alone non-GAAP EPS guidance) to 2013. Additionally, in 2013, Merck is targeting pretax margins¹ to be nearly 40 percent and free cash flow to be approximately $15 billion. In light of the announced transaction, Merck today provided 2013 guidance that supersedes previously provided 2010 stand-alone guidance.
Approvals and Time to Close
The transaction is subject to approval by Merck and Schering-Plough shareholders and the satisfaction of customary closing conditions and regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as clearance by the European Commission under the EC Merger Regulation and certain other foreign jurisdictions. Merck and Schering-Plough expect to complete the transaction in the fourth quarter of 2009.
Advisors
J.P. Morgan acted as financial advisor and Fried, Frank, Harris, Shriver & Jacobson LLP acted as legal advisor to Merck. Goldman, Sachs & Co. and Morgan Stanley acted as financial advisors and Wachtell, Lipton, Rosen & Katz acted as legal advisor to Schering-Plough.
Conference Call and Webcast
Merck and Schering-Plough will host a conference call today, March 9, 2009, at 8:30 a.m. EDT. To access the call, please dial 800-399-0127 (international: +44 (0) 1452 589 088) and reference conference ID number 89050874. A replay of the conference call will be available as soon as practicable following the end of the call until March 23, 2009 at 11:59 p.m. EDT. To access the rebroadcast, please dial 800-642-1687 (international: 706-645-9291) and reference conference ID number 89050874. In addition, an audio webcast of the call will be available live and will be archived on the investor relations portions of both companies’ Web sites at www.Merck.com and www.Schering-Plough.com, respectively, as well as on the joint Web site launched by the companies this morning, www.ANewMerck.com.
B-Roll Information
Broadcast quality video downloads of Richard T. Clark, Merck’s chairman, president and chief executive officer, are available at www.ANewMerck.com/media. Mr. Clark provides an overview of the transaction and he discusses the combined company’s product portfolio, the research capabilities of the expanded organization and the compelling nature of the combination.
Satellite Uplink for Merck B-Roll Availability on Monday, March 9, 2009
| Feed Time: | 9:00 - 9:15 AM ET (DEDICATED) | |
| Coordinates: | C-BAND: AMC 3/TRANSPONDER 14 / AUDIO 6.2 & 6.8 / DOWNLINK: 3980 (V) | |
| Feed Time: | 1:30 - 1:45 PM ET (DEDICATED) | |
| Coordinates: | C-BAND: AMC 3/TRANSPONDER 14 / AUDIO 6.2 & 6.8 / DOWNLINK: 3980 (V) | |
| Feed Time: | 3:00 - 3:15 PM ET (DEDICATED) | |
| Coordinates: | C-BAND: AMC 3/TRANSPONDER 14 / AUDIO 6.2 & 6.8 / DOWNLINK: 3980 (V) |
If you have questions or problems with the B-Roll satellite feeds, call (212)-812-7134.
About Merck
Merck & Co., Inc. is a global research-driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck currently discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs. The company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but help deliver them to the people who need them. Merck also publishes unbiased health information as a not-for-profit service. For more information, visit www.merck.com.
About Schering-Plough
Schering-Plough is an innovation-driven, science-centered global health care company. Through its own biopharmaceutical research and collaborations with partners, Schering-Plough creates therapies that help save and improve lives around the world. The company applies its research-and-development platform to human prescription, animal health and consumer health care products. Schering-Plough's vision is to “Earn Trust, Every Day” with the doctors, patients, customers and other stakeholders served by its colleagues around the world. The company is based in Kenilworth, N.J., and its Web site is www.schering-plough.com.
1. Excludes purchase-accounting adjustments, restructuring costs, acquisition-related costs and certain other significant items.
2. ZETIA and VYTORIN are currently sold through Merck’s and Schering-Plough’s joint venture, Merck/Schering-Plough Pharmaceuticals.
3. Reflects Merck and Schering-Plough reported 2008 sales plus 100 percent of the sales of the MSP joint venture.
Forward-Looking Statements
This communication contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on both Merck’s and Schering-Plough’s managements current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product potential or financial performance. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Merck and Schering-Plough undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements in this presentation should be evaluated together with the many uncertainties that affect either companies’ business, particularly those mentioned in the risk factors and cautionary statements set forth in Item 1A of either companies’ 10-K for the year ended December 31, 2008, and in their periodic reports on Form 10-Q and Form 8-K, which the companies incorporate by reference.
These reports are available at www.merck.com and www.schering-plough.com.
Additional Information
In connection with the proposed transaction, Schering-Plough will file a registration statement, including a joint proxy statement of Merck and Schering-Plough, with the Securities and Exchange Commission (the “SEC”). Investors are urged to read the registration statement and joint proxy statement (including all amendments and supplements to it) because they will contain important information. Investors may obtain free copies of the registration statement and joint proxy statement when they become available, as well as other filings containing information about Merck and Schering-Plough, without charge, at the SEC’s Internet site (www.sec.gov). These documents may also be obtained for free from Schering-Plough’s Investor Relations web site (www.schering-plough.com) or by directing a request to Schering-Plough Investor Relations at (908) 298-7436. Copies of Merck’s filings may be obtained for free from Merck’s Investor Relations Web Site (www.merck.com) or by directing a request to Merck’s Office of the Secretary at (908) 423-1000.
Merck and Schering-Plough and their respective directors and executive officers and other members of management and employees are potential participants in the solicitation of proxies from Merck and Schering-Plough shareholders in respect of the proposed transaction.
Information regarding Schering-Plough’s directors and executive officers is available in Schering-Plough’s proxy statement for its 2008 annual meeting of shareholders, filed with the SEC on April 23, 2008, and information regarding Merck’s directors and executive officers is available in Merck’s preliminary proxy statement for its 2009 annual meeting of stockholders, filed with the SEC February 25, 2009. Additional information regarding the interests of such potential participants in the proposed transaction will be included in the registration and joint proxy statement filed with the SEC in connection with the proposed transaction.
