Schering’s board accepts €16.3bn cash bid from Bayer

03/24/06 - newratings.com

LONDON, March 24 (newratings.com) - Bayer AG (BAY1-EUR), Germany's biggest pharmaceutical company, Friday announced a €16.3 billion cash bid for its smaller domestic rival Schering AG.

The Leverkusen-based company said it was offering €86 for each share of Berlin-based Schering. Schering is currently facing an unsolicited offer from Darmstadt-based Merck KGaA of €14.6 billion, or €77 per share. Schering rejected Merck’s offer saying it seriously undervalued the company. Schering said it had accepted Bayer’s white-knight offer, which represents a 12% premium to Merck’s bid, and would recommend the same to its shareholders.

Bayer’s sales have been under pressure since the recall of its anti-cholesterol drug, Baycol, in August 2001. The proposed Schering acquisition would be Bayer’s biggest in its more than 140-year history.

The company said the combined entity, Bayer-Schering Pharmaceuticals, would be based in the German capital of Berlin and would have sales of nearly €15 billion. Bayer added that it expects integration costs to be approximately €1 billion and annual savings of more than €700 million from the third year after the acquisition. Bayer expects the deal to be completed in the second quarter and be earnings accretive in 2008.