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Sanofi-aventis, Merck: new animal health JV

Global pharmaceutical company Sanofi-aventis, headquartered in Lyon, France, exercises its option to combine Merial with Intervet/Schering-Plough in a new equally-owned joint venture with Merck.

Sanofi-aventis and Merck & Co, headquartered in Whitehouse Station, NJ, USA, announced this news this Tuesday. Intervet/Schering-Plough is Merck's animal health business and based in Boxmeer, the Netherlands.

The new joint venture will be equally-owned by Merck and sanofi-aventis. The completion of the transaction is expected to occur in approximately the next 12 months following execution of final agreements, antitrust reviews and other customary closing conditions.

Opportunity
"The upcoming combination of Merial and Intervet/Schering-Plough is an exciting opportunity for Sanofi-aventis to create with Merck a leading company in the animal health strategic and growing sector,” said Christopher A. Viehbacher, chief executive officer, Sanofi-aventis.

"I am convinced that, together, we will create strong value in bringing broader and improved offerings in both pet and production animal segments.”

Bolstering a portfolio
"Merck has been in the animal health business for well over six decades and through this new joint venture, we will bolster our diverse portfolio and create a new global competitor poised for growth,” said Richard T. Clark, Merck chairman, president and chief executive officer.

“This new joint venture delivers on Merck's commitment to customer focus by creating one of the broadest portfolios of animal health products and services […]. The planned joint venture will have an attractive geographical network of global technology and expertise to provide health solutions based on customers' needs, which often vary regionally.”

Enterprise value
The entreprise value of Merial has been fixed at US$8 billion and the entreprise value of Intervet/Schering-Plough at $8.5 billion, leading to a true-up payment of $250 million to Merck to establish a 50/50 joint venture.

An additional amount of $750 million will be paid by Sanofi-aventis, as per the terms of the agreement signed on July 29, 2009.

5% global market growth
The worldwide animal health market reached $19 billion in 2008. Products for companion animals accounted for 40% of total sales while products for production animals accounted for the remaining 60% of total sales.

This market is expected to grow at around 5% per year over the next five years, driven by a growing demand for animal proteins, as well as a strong consumer needs for companion animal health care.

The companies said that both Merial and Intervet/Schering-Plough will continue to operate independently until the closing of the transaction.

No total surprise
The news of the setting up of a new animal health business does not come as a total surprise. Formed in 1997, Merial was a 50/50 joint venture between Merck and Sanofi-aventis. The company became a wholly-owned subsidiary of Sanofi-aventis, after Sanofi-aventis acquired Merck's interest in Merial for a cash consideration of $4 billion (US) in 2009.

Merck, in turn, had to sell its interest in Merial after it merged with pharmaceutical company Schering-Plough in March, 2009. This deal included Intervet/ Schering-Plough. 

Related websites:
• Intervet/Schering-Plough Animal Health
• Merck & Co
• Merial
• Sanofi-aventis

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