Sanofi-Aventis to acquire Merck's Merial stake for $4 billion

French drug maker Sanofi-Aventis has signed a deal to buy Merck & Co.'s 50 per cent stake in their animal health joint venture Merial Ltd. for $4 billion in cash.

Paris-based Sanofi-Aventis said the acquisition values Merial three times the 2008 sales and ten times the 2008 earnings before interest and taxes (EBIT).

Merial Limited, a 50:50 joint venture between Merck & Co. and Sanofi-Aventis, with 2008 sales of $2.6 billion, was set up in 1997 and is a world-leading, innovation-driven animal health company, providing a comprehensive range of products to enhance the health, well-being and performance of a wide range of animals.

Merial makes pet medicines like flea-and-tick blocker, Frontline and chewable heartworm preventer Heartgard, plus Ivomec, a parasite killer in cattle.

Merck is forced to sell its stake in order to avoid any problems from the antitrust regulatory authorities of approving its merger with US rival Kenilworth, New Jersey-based Schering-Plough, (See: Merck to acquire Schering- Plough for $41 billion)  which also is in the veterinary health care business and make it a dominant player in the animal-medication business.

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 call option agreement, following the closing of the Merck/Schering-Plough merger, Ssanofi-Aventis would have an option to combine the Intervet/Schering-Plough animal health business with Merial to form an animal health joint venture that would be owned equally by the new Merck and Sanofi-Aventis.