Deal dissection of the day, No. 2: Merck and Schering-Plough are getting worked over in the media, too, with everything from the "reverse merger" form of the deal--what's that about?--to possible spinoff sales up for discussion. Here's today's crop:
- What's a reverse merger anyway? A complex deal structure under which Merck would technically become a subsidiary of Schering --and rename itself Merck. "Reverse mergers are a common thing [in other industries], and it's always a question of what tax or licensing agreements that a merger would trigger," Mike Luby, co-founder of TargetRx, told PharmExec. "If it ends up strategically beneficial to have Merck merge into Schering and then change the name to Merck, then that's the way it gets done.
- The reason for that reverse merger--Johnson & Johnson--is keeping mum about its Remicade partnership with Schering. Analysts tell the New York Times that the company might take the Remicade case to arbitration, or maybe even try to pre-empt the Merck-Schering deal with a higher takeover bid. The most complicated hypothesis involves a Solomonic solution in which Johnson & Johnson and Merck split Schering.
- In a backwards version of the Genentech lament--swallowed by Roche, Genentech will lose its character--Matthew Herper at Forbes says Merck is throwing away its je ne sais quoi by buying Schering-Plough. Sure, it may make financial sense. ("To the extent that any mega-merger has a chance, this one does," says Les Funtleyder, pharmaceuticals analyst at Miller Tabak.) But, writes Herper, "the Schering deal marks the end of a set of ideas Merck once represented: the primacy of science in the pharmaceutical business, a faith that ingenuity trumps cost-cutting and marketing, and a pride in its own work that was so intense that the suggestion of buying a rival was a tactic of last resort."
- Schering's shares and options spiked a couple of times over the past two weeks, after more than a year of moribund behavior. The Friday before the deal was announced, SGP rose 8 percent, while other pharma stocks rose only 3 percent to 4 percent, the Wall Street Journal reports. Did the news leak somehow? Was there insider trading? WSJ says the SEC should take a look.
- Sanofi-Aventis might buy Merck's stake in Merial, an animal-health venture between the two firms, and expand into the diagnostics market to revive growth, RTT News says (quoting Bloomberg). Merial is the world's third-biggest animal-health company and the stake could be worth about $2.6 billion.
Have you seen any new angles on the Merck-Schering deal that we've missed? Let us know.