Sanofi, Merck to reunite animal health ops

It's official: Sanofi-Aventis and Merck are hooking up again on animal health. By combining the animal health business Merck acquired along with Schering-Plough--Intervet--with Sanofi's now-wholly-owned Merial, the companies would create the biggest animal drugs-and-vaccines company in the world.

Merck and Sanofi dissolved their joint venture on Merial when Sanofi bought Merck's 50 percent share for $4 billion. At the time, Sanofi also got an option to buy into a new animal health JV with Merck. Ever since, CEO Chris Viehbacher has been saying that he'd likely do so. Given his drive to diversify at Sanofi, investing more in animal health made sense; the growth in sales of animal drugs and shots is expected to outstrip growth in human meds over the next few years, with an annual increase of about 5 percent through 2014.

And so Merck and Sanofi's animal businesses will reunite. Sanofi will pay Merck $1 billion for the privilege--$250 million on top of the $750 million agreed up on last year, Reuters reports. "Overall it's a good deal for Sanofi," Helvea analyst Karl-Heinz Koch tells Reuters. "It adds stability to profits as patents expire."

Of course the combo has to get approval from antitrust regulators; after all, it was antitrust concerns that prompted Merck to offload its Merial stake to begin with. But the companies say they'll divest assets as necessary to get the deal approved. In the market for poultry vaccines? You may be able to buy some soon.

- read the Reuters story
- see the article from MarketWatch
- get Bloomberg's take