Mylan acquires Merck Generics for €4.9bn

14 May 2007 07:04  [Source: ICIS news]

SINGAPORE (ICIS news)--US-based Mylan Laboratories on Sunday acquired Germany’s Merck KGaA’s generics unit for €4.9bn ($6.6bn) in cash, edging out private equity firms and other pharmaceutical majors which were reportedly involved in the bid.

On a pro forma basis for 2006, the combination of Mylan and Merck Generics would have had revenues of about $4.2bn, earnings of $1bn and around 10,000 employees, making it among the top tier of global generic companies that include Israel’s Teva Pharmaceutical Industries and Switzerland’s Sandoz, the company said.

Private equity firms Carlyle, Bain Capital, Apax Partners, Kohlberg Kravis & Roberts and Warburg Pincus, were reportedly eyeing the deal.

Pharmaceutical companies which had joined in the fray included Teva, India’s Dr Reddy’s Laboratories and France’s Sanofi-Aventis.

Among those which had made their buying intentions open were India’s Ranbaxy Labs and Iceland’s generics producer Actavis.

In addition to retaining Hank Klakurka, currently president and CEO of Merck Generics, Mylan said it has reached long-term employment contracts with members of Merck Generics’ senior management team.

“Mylan is already a leader in the US...Merck Generics provides us with leading positions in many of the world’s other key regions. Together, we will form a powerful, diverse, robust and vertically integrated generics platform,” said Robert J. Coury, vice chairman and CEO of Mylan.

The combination with Merck Generics will significantly extend Mylan’s range of therapeutic categories and dosage forms, and bring to the company a number of new, differentiated products and successful franchises, he added.

“The two businesses are an excellent fit in terms of geography and product mix, and together we can offer extremely attractive product baskets across our combined territories,” said Merck Generics’ Klakurka.

The transaction creates critical mass by combining Mylan’s leading position in the US with Merck Generics’ broad geographic mix in countries such as Australia, France, Japan, Portugal, Spain and the UK, said Mylan.

The new company will also be well-diversified across most therapeutic areas with about 560 products, it added.

Mylan and Merck Generics will also benefit from significant savings driven by Matrix’s low-cost, high quality API (active pharmaceutical ingredients) capacity and the benefits of manufacturing high product volumes for multiple markets around the world, said Mylan.

In 2007, Mylan completed its acquisition of a 71.5% stake in India-based Matrix, the second largest API manufacturer globally, with more than 165 APIs in the marketplace or under development.

Mylan expects to save about $250m by the end of the third year of the acquisition and said it doesn’t expect significant reductions in headcount at Mylan, Matrix or Merck Generics in order to achieve these synergies.

The combined company’s long-term compounded net income growth is expected to exceed 30% per annum and long-term revenue growth in excess of 10%, said Mylan.

The transaction is expected to close in the second half of 2007.

($1 = €0.74)

By: Jeanne Lim
+65 6780 4359

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