3rd UPDATE: Merck Withdraws FTC Filing Over Schering, To Re-File
May 19 2009 - 12:53PM
Dow Jones News
Drug maker Merck & Co. (MRK) said it withdrew its initial
filing for U.S. antitrust clearance of its proposed $41 billion
purchase of Schering-Plough Corp. (SGP), but plans to re-file with
additional information as soon as possible.
Merck, based in Whitehouse Station, N.J., still expects to close
the acquisition by end of the year, spokesman David Caouette told
Dow Jones Newswires. He declined to specify the additional
information Merck will provide or what led to the withdrawal of the
initial filing.
The development may be nothing more than a procedural hiccup,
and probably won't unravel the deal. Still, it represents a misstep
in a merger process that has otherwise gone relatively
smoothly.
Merck shares declined 34 cents, or 1.3%, to $25.40 Tuesday,
while Schering shares were off 29 cents, or 1.2%, at $23.47.
In April, Merck filed information about its proposed acquisition
with the U.S. Federal Trade Commission under the Hart-Scott-Rodino
Act, which is designed to give the government time to review deals
and ensure they aren't anti-competitive. Sometimes the FTC requires
asset divestitures if two companies have overlapping
businesses.
Cowen & Co. analyst Steve Scala said in a note Tuesday "one
of the potential areas of overlap is Merck and Schering's
animal-health businesses." Merck has a joint venture animal-health
business with Sanofi-Aventis SA (SNY).
At a Deutsche Bank conference in Boston, Merck Chief Financial
Officer Peter Kellogg confirmed that the antitrust review will
focus on the animal-health business because it is a "highly
overlapping area" for the companies.
Kellogg referred to the re-filing as part of the "normal process
of working with the FTC and sorting through what information will
be most helpful for their first review."
A 30-day waiting period for Merck's initial filing was set to
expire Monday, May 18, Caouette said. But Merck decided to withdraw
the filing Monday and will re-file soon, which will trigger another
30-day waiting period, he said.
"We believe the re-filing for us will provide a productive
review process," Caouette said. "Other parties have taken similar
actions in past transactions. We decided to re-file as part of our
efforts to cooperate with the FTC in their review of the
transaction."
Even when the new 30-day waiting period expires, it could be
followed by a so-called second request for information from the
FTC, which is relatively routine. In April, Pfizer Inc. (PFE)
received a request for more information about its proposed
acquisition of Wyeth (WYE). Pfizer also has said it may have to
shed animal-health assets to get the deal done.
Cowen's Scala said a re-filing could help Merck avoid the delay
and cost of complying with a second FTC request for information,
although there's no guarantee of this.
Schering-Plough also continues to expect the deal to close by
the end of the year, said spokesman Steve Galpin.
An FTC spokesman said the agency doesn't comment on any aspect
of the pre-merger process, and that all filings and related actions
are nonpublic.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
(Thomas Gryta contributed to this story)