UPDATE: Merck, Schering Settle Holder Suits Related To Deal
July 24 2009 - 12:55PM
Dow Jones News
Merck & Co. (MRK) and Schering-Plough Corp. (SGP) announced
proposed settlements to shareholder lawsuits stemming from their
merger, valued at $41 billion when announced in March.
The agreements must be approved by the court and will settle all
claims brought by either company's shareholders "challenging any
aspect" of the deal. No damages will be paid, but the settlements
refer to the disclosure of additional information related to the
deal and also may cover attorneys' fees and costs.
Both companies said the settlements aren't an admission of
wrongdoing or liability and were reached to "avoid the further
costs and inherent uncertainty of litigation."
The merger, which remains subject to government antitrust
clearance and shareholder approval, is expected to close by
year-end.
Shares of Merck recently rose 29 cents to $30.54, while
Schering's stock was up 1 cent to $26.82.
In a filing with the Securities and Exchange Commission,
Schering detailed allegations from certain suits, which alleged a
breach of fiduciary duty to shareholders in agreeing to the Merck
deal. It also included information on the amendments made to the
merger agreement while it was being finalized.
Under its settlement, Merck didn't have to make additional
disclosures, a spokeswoman said, and the bulk of information
referenced in the agreement was already contained in a June filing
with regulators. That information mostly relates to opinions issued
by Morgan Stanley (MS), Goldman Sachs Group Inc. (GS) and JPMorgan
Chase & Co. (JPM) that state Merck is paying a fair price of
Schering. The opinions are based on evaluating the companies from
various financial angles.
The drug makers also highlighted the fees paid to those same
firms for financial advisory services, with JPMorgan receiving $45
million, Goldman Sachs getting $33.3 million and Morgan Stanley $22
million, all of which are fully paid upon closing of the deal.
Those firms also will receive reimbursement for expenses and are
indemnified against certain liability that could arise from their
work.
Shareholder lawsuits against merging companies - and their
settlements - aren't unusual. Genentech Inc. and Roche Holding AG
(RHHBY) reached a similar settlement before their March merger,
including potential coverage of lawyers' fees.
-Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com