German drugs firm Bayer launches bid for Schering

24th March 2006, Comments 0 comments

24 March 2006, BERLIN - Germany's Bayer AG launch of a 16.3 billion-euro (19.7 billion-dollar) bid for rival Schering AG sparked Friday a fresh round of speculation about consolidation in the nation's giant drug industry, driving up shares for other leading pharma companies.

24 March 2006

BERLIN - Germany's Bayer AG launch of a 16.3 billion-euro (19.7 billion-dollar) bid for rival Schering AG sparked Friday a fresh round of speculation about consolidation in the nation's giant drug industry, driving up shares for other leading pharma companies.

One day after Bayer announced that it was sailing to Schering's defence against a hostile bid from another German drug company Merck KGaA, shares in both Berlin-based Schering and Bayer jumped by 3.9 per cent and 1.7 per cent respectively.

Bayer chief Werner Wenning said the merger would result in job cuts of 6,000 which represents about 10 per cent of the combined Bayer-Schering workforce.

The offer from Bayer, which is the biggest in the company's more than 140-year history, tops Merck's 14.6-billion-euro hostile plan.

With Merck ruling out raising its bid and Schering saying it would recommend to its shareholders that it accept the Bayer bid, the way appears to be cleared for the creation of a new drugs market force with combined sales of more than nine billion euros.

The Bayer offer was "extremely attractive," Schering chief Hurbertus Erlen said Friday.

"Both businesses are complementary and follow the same strategy," Erlen said, with Schering shares having soared by about one third since the battle over control of the company began to emerge earlier this month.

Echoing Erlen's remarks, Wenning said Schering was "an excellent fit" in Bayer's strategy.

Wenning went on to say that the merger will lead to "new business fields being opened up", adding that the new Bayer-Schering group would be worldwide the number seven in specialised pharmaceuticals.

News of Bayer riding to Schering's aid as a corporate white knight helped to drive up shares in other leading German drug companies as investors speculated about further merger moves in the pharma sector in Europe's biggest economy, while shares in Atlanta rose by 2.2 per cent and Stada shares jumped by 3.6 per cent.

"The pressure for consolidation is unavoidable and has gained new momentum," said Alexander Groschke, drugs industry analyst with Landesbank Rheinland-Pfalz.

The offer by Bayer values Schering's shares at 86 euros, which is much higher than the 77 euros offered by Merck. Shares in Schering, which is the world's biggest manufacturer of contraceptive pills, were trading at 88.29 euros in early trading Friday.

Bayer expects to generate annual savings of more than 800 million dollars three years after the merger and estimates that integration costs would total about 1.2 billion dollars.

The proposed new merged group will be called Bayer-Schering Pharmaceuticals and have its headquarters in Berlin, Bayer said.

DPA with Expatica

Subject: German news

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