SANOFI-AVENTIS S.A. and Merck & Co. announced last week that sanofi-aventis has exercised its option to combine its Merial animal health business with Merck's Intervet/Schering-Plough Animal Health business, creating the global leader in animal health medicines.
The joint venture will be equally owned by sanofi-aventis and Merck, according to the announcement. The combination is subject to regulatory reviews in Europe, the U.S. and other countries and other customary closing conditions but is expected to be completed in the next 12 months.
The new organization would have one of the broadest portfolios of animal health biologicals and pharmaceuticals for millions of customers, including farmers, pet owners and veterinarians, said Merck chair, chief executive officer and president Richard T. Clark.
The organization would create "an exciting opportunity ... in a growing and strategic sector," sanofi-aventis CEO Christopher A. Viehbacher added, noting that the worldwide animal health market is a nearly $20 billion market that is projected to grow 5% per year over the next five years.
He also cited a global population that's on trend to increase 50% to 9 billion people in the next 40 years and accompanying forecasts that food production -- including meat, poultry and milk production -- must double to serve that population, especially given how emerging markets are creating new middle classes.
The merger will take the form of sanofi-aventis' acquisition of Intervet/Schering-Plough for $1 billion in an initial payment of $250 million and an additional payment of $750 million, according to terms of the agreement.
Intervet/Schering -Plough and Merial are the second- and third-largest animal health companies in the world behind Pfizer Animal Health, which became the largest in the world when Pfizer Inc. acquired Wyeth and, with it, Wyeth's Fort Dodge Animal Health business (Feedstuffs, Oct. 19, 2009).
The two animal health companies are greatly complementary, with Intervet/Schering-Plough strong in production animals and reproduction technologies and Merial strong in companion and performance animals.
The combination of Intervet/Schering-Plough and Merial would create an animal health company with more than $5.5 billion in sales and 30% of the global market, compared with Pfizer's 21% share.
However, it's largely presumed that they will need to shed some products to gain regulatory clearance. Indeed, Clark and Viehbacher, in a conference call, said poultry vaccines, where combined market share would be about 75%, are one part of the merged portfolio that would be subject to sales to other parties.
Intervet/Schering-P lough and Merial will continue operating independently pending the closing of the transaction, according to the announcement.
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