Bayer plays white knight for Schering

April 2, 2006

Merck is out and Bayer is in, as the race to win the corporate hand of Schering appears to be over. Representatives of the Berlin-based contrast media giant were nonplussed from the start with Merck’s bid, which Schering executives said undervalued the company.

Merck is out and Bayer is in, as the race to win the corporate hand of Schering appears to be over. Representatives of the Berlin-based contrast media giant were nonplussed from the start with Merck's bid, which Schering executives said undervalued the company.

Predictions that Schering would accept only a bid 30% to 35% above the closing price on March 10 (DISCAN 3/20/06) proved true. The executive board of Schering announced March 24 that it was looking favorably on Bayer's all-cash bid of €86 ($103) per share, a 29.7% bump over the March 10 closing price of $79.70.

"The executive board has carefully examined the proposal considering the interests of all stakeholders. The price of €86 per share, in connection with several other important commitments, is a good offer," said Dr. Hubertus Erlen, chairman of the executive board of Schering. "The businesses are complementary and follow the same strategy. Together they will be even more competitive internationally."

This view was echoed March 27 by the Schering supervisory board, which said it would recommend accepting the bid to the company's shareholders once the formal offer documents have been published and assessed.

Merck withdrew its bid in the wake of Bayer's offer, which places a $19.5 billion (€16.3 billion) value on the transaction, about $2.5 billion more than Merck was willing to pay.

Schering and Bayer have already begun filling in the details about what the new company might look like. Bayer Schering Pharma would be headquartered in Berlin and operate research facilities in Berlin and Wuppertal, Germany, as well as Richmond, VA, Berkeley, CA, and West Haven, CT. It would have annual sales approaching €10 billion ($12 billion).

Last year, the sale of x-ray and MR contrast media, along with radiopharmaceuticals, accounted for 26% of Schering sales. Net sales of Schering's Magnevist, Ultravist, and Iopamiron agents increased 8%, 5%, and 1%, respectively, over 2004.

Although Schering is viewed in imaging circles as a supplier of contrast agents, the company is best known as a maker of oral contraceptives and cancer drugs. Its merger with Bayer would forge one of the largest pharmaceutical companies in the world.