Sanofi-aventis To Acquire Merck’s Interest In Merial

Sanofi-aventis and Merck & Co. have signed an agreement under which Merck will sell its 50% interest in the companies’ current animal health joint venture, Merial, to Sanofi-aventis for $4 billion.

Formed in 1997, Merial is a animal health company that is a 50/50 joint venture between Merck and Sanofi-aventis. Following the close of the transaction, Sanofi-aventis will own 100% of Merial.

Sanofi-aventis said that the acquisition price values Merial on the basis of 3.0 x 2008 sales and 10.2 x 2008 earnings before interest and taxes (EBIT). The acquisition is expected to be accretive to Sanofi-aventis’ adjusted net income from the first year.

In addition to the Merial agreement, Merck, Sanofi-aventis, and Schering-Plough announced the signing of a call option agreement. Under the terms of the agreement, following the closing of the Merck/Schering-Plough merger, Sanofi-aventis would have an option to combine the Intervet/Schering-Plough Animal Health business with Merial to form an animal health joint venture. This JV would be owned equally by the new Merck and Sanofi-aventis.

Richard Clark, chairman, president and chief executive officer of Merk, said: These agreements should enable us to proceed expeditiously with the closing of our merger with Schering-Plough in the fourth quarter as planned, and also gain an outstanding animal health business through Intervet/Schering-Plough Animal Health. We are pleased that our long-time partner Sanofi-aventis will purchase Merck’s interest in Merial, the successful joint venture we built together. We look forward to the potential opportunity to bring together the strong animal health businesses of Sanofi-aventis and the new Merck.