Sanofi, Merck to create massive joint venture

A huge, new animal health company will take shape over the next year, as Merck & Co. and sanofi-aventis figure out the details of their new joint venture, announced last week.

The joint venture will be owned equally by Merck and sanofi-aventis, and will be a combination of animal drug companies Merial and Intervet/Schering-Plough. This is not the first time Merck and sanofi have jointly owned an animal health company.

Merial was originally a joint venture between Merck and sanofi, but sanofi paid $4 billion in cash for Merck’s 50 percent of the company in September. Merck was required to sell its share of Merial in order to avoid anti-trust issues, due to its $41 billion merger with Schering-Plough Corp., which included that company’s animal health operation, Intervet/Schering Plough.

As part of the Merial buyout, after the Merck-Schering-Plough deal closed, sanofi had the option to merge Merial with Intervet. Sanofi has now officially exercised this option.

Merial’s enterprise value (sometimes known as takeover value) is set at $8 billion, while Intervet’s enterprise value is $8.5 billion, according to the companies. Sanofi will pay Merck $1 billion to complete the deal and establish 50/50 ownership.

A sanofi-aventis spokesman declined to say what the new joint venture might be called, and could not say whether the product lines for either company would change. Sanofi did offer a general statement that the merger would ultimately benefit veterinarians.

“We believe the combination of Merial and Intervet/Schering-Plough will create strong value in bringing broader and improved offerings in both pet and production animal segments,” said Jack Cox, senior director of Public Affairs and Media Relations for sanofi-aventis, U.S.

Representatives from Merck did not respond to questions.

Louise Dunn, owner of Snowgoose Veterinary Management Consulting was optimistic about the companies’ dedication to veterinarians, and said the merger would probably be good for practices.

“All of the indications I have gotten from Intervet/Schering-Plough and Merial is that their commitment to the profession has actually intensified,” Dunn said. “They’re going to work on strategic alliances, helping control inventory costs, and helping to grow practices.”

According to the companies, Merial and Intervet/Schering-Plough will continue to operate independently until the closing of the transaction sometime in the next 12 months. The deal is still subject to antitrust review in the United States, Europe and other countries.