Merck KGaA makes hostile 14.6 billion-euro bid for Schering AG, which snubs it

Merck KGaA has announced an unsolicited, all cash, bid for fellow German drugmaker Schering AG for a total consideration of 14.6 billion euros ($17.53 billion), or 77 euros per share, a 15% premium to the latter's closing price on March10. Merck said the combination of the two firms would create a world-class pharmaceutical and chemicals company with pro forma annual revenues of 11.2 billion euros.

Schering, shares of which leapt 22% to 81.44 euros in morning trading on March 13, dismissed the offer, saying in a press statement that it "significantly undervalues" the company and that it is not in talks with Merck. "We do not need to join with Merck in order to be able to do our business successfully," added spokesman Christof Ehrhart speaking to the German radio station ZDF.

Whether this leads to a higher offer or a bidding war with other pharmaceutical companies remains to be seen. Analysts at Lehman Brothers suggest that, at 77 euros a share, "the deal is accretive, creates no anti-trust issues and the likelihood that many Schering executives will feel that this could be a reverse takeover, and be more palatable than alternatives."