M&A Is Dead. Long Live M&A.

The rumors of its demise are grossly exaggerated it would seem.

Merck on Monday announced an agreed $41bn takeover of its New Jersey rival, Schering-Plough..”  (via FT)

“Roche Holding AG has sweetened its offer for Genentech Inc by about 2 percent to $46.7 billion..” (via Reuters)

And a little over a month ago:

Pfizer on Monday unveiled a $68bn takeover of Wyeth, reasserting its flagging position as the world’s largest pharmaceuticals group and paving the way for a fresh bout of consolidation across the sector.” (via FT)

Of course, you don’t see any private equity names in those headlines.  How about cash?  Pfizer has a $22.5 billion bridge from five banks.  Do you think there are any covenants there?  How about MAC clauses?  It will be interesting to see the take-out of the bridge.  It will likely be in the public markets – debt perhaps.  They may have announced plans, but the Cowboy hasn’t seen them.

In the Merck Schering deal, they are using a reverse takeover structure to avoid a change of control provision in their deal with J&J for the drug Remicade which would have forced Schering to relinquish its stake in the drug.  As for cash, $9.8 billion plus $8.5 billion from JP Morgan.  Apparently, JPM did all of it as Merck’s M&A advisor in order to keep things hush-hush.  The Cowboy has heard that it will be taken out by a syndicated bank deal.  I wonder how that syndication will go.  Will they have to do much arm-twisting?

Are pharmaceuticals on steroids?  An article in the Economist explains some of the phenomenon.  It sounds like the lack of new drugs in the pipeline is the biggest problem.

Well, steroids might pump you up, but the long-term ramifications may not be in your best interest.

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Published in: on March 10, 2009 at 15:42  Comments Off on M&A Is Dead. Long Live M&A.  
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