Merck & Co.'s (MRK) animal-health deal with Sanofi-Aventis SA (SNY) Thursday gets Merck one step closer to closing its purchase of Schering-Plough Corp. (SGP) - and should support Merck's post-merger vision for earnings growth.

In March, when Merck announced its $41 billion cash-and-stock offer for Schering, Merck executives said they expected the deal to result in average annual earnings growth, excluding certain items, in the high-single digits on a percentage basis through 2013.

That forecast essentially assumed that Merck would retain half of Schering-Plough's animal-health business and the other half would be realized in an asset sale. Merck executives in March discussed a scenario of rolling Schering-Plough's animal-health operations into Merck's 50-50 venture with Sanofi, called Merial.

That appears to be just what Merck is doing, albeit in a two-step process that has an element of uncertainty. Merck said Thursday that it would sell its 50% stake in Merial to partner Sanofi for $4 billion cash.

That will give Sanofi 100% ownership of Merial - at least temporarily - and presumably satisfy antitrust regulators' concerns about Merck gaining too much share of the animal-health market by having both a 50% stake in Merial and all of Schering's animal-health assets. The Sanofi deal is expected to clear the way for Merck to close its Schering-Plough purchase by year end.

"We believe that the divestiture of our interest in Merial should remove the potential of any competitive issues" related to Merck's deal with Schering-Plough, Merck spokeswoman Amy Rose said.

Merck could choose to hang onto Schering-Plough's animal-health assets following the companies' merger. But there's more to Thursday's Sanofi deal that makes that unlikely. Sanofi also obtained a call option - after Merck closes the Schering-Plough deal - to combine Merck's newly acquired animal-health assets with Merial in a new venture that would be 50-50 owned by Sanofi and the new Merck.

Sanofi would have to pay Merck an additional $750 million to make this new combination. The outcome would be that Merck and Sanofi would once again have a 50-50 animal-health joint venture, but it would include the Schering-Plough animal-health assets Merck stands to inherit.

Miller Tabak analyst Les Funtleyder suspects Sanofi got the better end of the bargain because Merck was under regulatory pressure to deal, while Sanofi, as an existing partner in Merial, had a close understanding of its worth. Still, it serves the larger purpose of getting the Schering-Plough deal done, which Funtleyder thinks is a good move for Merck.

There are lots of moving parts here, but the upshot is that this appears to be exactly what Merck had in mind in March.

Still, it raises the question of whether a bulked-up Merial venture wouldn't spark the same antitrust concerns that arose in the Merck-Schering-Plough deal. Merck and Sanofi say a combination of Merial and Schering-Plough's animal-health assets would be subject to antitrust clearance, and Sanofi acknowledged Thursday some divestitures might have to be made to satisfy regulators. Plus, Merck's half ownership stake of a Merial with Schering's animal-health assets would be less than if Merck continued to own 50% of the current Merial and all of Schering-Plough's animal-health assets.

Barclays Capital analyst Tony Butler says there's a small chance the U.S. Federal Trade Commission could be uncomfortable with the option arrangement, which could complicate Merck's plans.

An FTC spokesman declined to comment.

Sanford C. Bernstein analyst Tim Anderson estimates a bulked-up Merial would contribute about 3% of the new Merck's annual earnings. Merck could get a slightly higher earnings contribution if it keeps Schering-Plough's animal-health business for itself. But to ensure that, it would have to pay $400 million to $600 million to Sanofi to cancer the call option. And it would be forgoing the additional payment from Sanofi to form the new joint venture.

"Today's news was not unexpected, but is a slight positive in that it takes MRK/SGP one step closer to merger completion," Anderson wrote in a note.

The Merck-Schering-Plough deal is still subject to approval by both companies' shareholders, who are scheduled to vote in early August.

More animal-health deals are on the way. Pfizer Inc. (PFE), which has agreed to buy Wyeth (WYE), has said some of the combined entity's animal-health assets would have to be divested to satisfy antitrust regulators.

In afternoon trading in New York, shares of Merck rose 1.6% to $30.35, Schering-Plough gained 1% to $26.80, and American depositary shares of Sanofi were up 4 cents at $33.03.

-By Peter Loftus, Dow Jones Newswires; 215-656-8289; peter.loftus@dowjones.com

(Mimosa Spencer contributed to this article.)