Merck & Co to buy back $5-bn worth stock

22 May 2013

Merck & Co yesterday said that it has entered into an accelerated share repurchase (ASR) agreement with Goldman Sachs to repurchase $5 billion stock, as part of the drug giant's previously announced $15-billion share repurchase program.

Under the ASR, Merck, the second-largest US drugmaker, will repurchase about 99.5 million shares from Goldman Sachs at current market prices.

''This accelerated share repurchase demonstrates our commitment to delivering increased value to shareholders in the short term, while continuing to invest in the important opportunities that will drive our long-term growth,'' said Kenneth Frazier, chairman and CEO of Merck.

Under the terms of the ASR, the final number of shares to be repurchased will be based on Merck's volume-weighted average stock price during the term of the transaction, which is expected to be completed no later than 25 November 2013.

In the first four months of the year, Merck has repurchased around 17.8 million shares for a total of $772 million.

The New Jersey-based company said that as of 30 April 2013, its total outstanding share repurchase authorisation was $16.1 billion, which included $1.1 billion in authorised repurchases remaining under the program previously announced on 27 April 2011.

Merck has forecast a profit decline this year with generic competition to its top-selling drug Singulair set to rise, and an inability to introduce new drugs due to research setbacks.

The drugmaker has been axing thousands of jobs even as it looks to boost demand for existing products to overcome the loss of revenue from Singulair Maxalt and Temodar.

According to analysts, investors are looking for Merck to restructure and perhaps sell off non-pharmaceutical units.