Merck & Co. Inc. and Schering-Plough are the latest contenders to step into the Big Pharma M&A arena after approving a definitive merger agreement whereby Merck will buy Schering-Plough for approximately $41.1 billion.

One of the principal benefits of the transaction will be the expansion of Merck's portfolio of medicines, which will be complemented by the addition of valuable products with long periods of exclusivity as well as new biologics expertise. The merger will also double the number of potential medicines Merck has in Phase III development, increase manufacturing capabilities and create a strong financial profile as the combined 2008 revenues of the two companies totalled $47 billion.

"The combined company will benefit from a formidable R&D pipeline, a significantly broader portfolio of medicines and an expanded presence in key international markets, particularly in high-growth emerging markets," says Richard T. Clark, who will be leading the new company as Chairman, President and CEO. "Through their talent and dedication, Schering-Plough employees have built an industry-leading R&D engine and late-stage pipeline that is complimentary to our own. We are confident that, together, Merck and Schering-Plough will make a meaningful difference in the future of global healthcare."

The price represents a premium to Schering-Plough shareholders of approximately 34% based on the closing price of the stock on 6 March 2009. Schering-Plough shareholders will receive 0.5767 shares and $10.50 in cash for each share while each Merck share will automatically become a share of the combined company, which will be called Merck.

Although the merger offers numerous benefits for both companies, the same might not be true of all employees. Hiring freezes have already been instituted in both companies, but Merck has said that the "substantial majority" of Schering-Plough employees will remain with the company.

www.merck.com
www.schering-plough.com