Bayer set to win bidding for Schering as Merck pulls out

The pharmaceuticals market in Germany appears on the brink of a wave of consolidation after a proposed €16.3bn (£11.3bn) tie-up between Bayer and Schering trumped a rival hostile €14.9bn offer from Germany's Merck.

What promised to be a lengthy takeover tussle between two of Germany's leading drugmakers ended in a triumph for Bayer as drug and chemical giant Merck, pulled out of this race for the top spot in Germany's pharmaceuticals industry. The deal unites Schering, the world's largest maker of birth control pills, with Bayer, one of the country's last remaining pharmaceutical and chemical conglomerates.

Merck, whose €77-a-share offer for Schering was trumped late Thursday by Bayer's bid of €86 said yesterday in a statement that it was abandoning its offer because its board "reached the conclusion that a higher price per Schering share is not justified and has therefore decided not to pursue the planned takeover of Schering".

Bayer, a 143-year-old company best known for having invented aspirin, said that the merger could result in as many as 6,000 job cuts as the two companies remove overlaps at production sites and join forces in research and development. Bayer's chief executive Werner Wenning said the company would use Schering's network in the United States to market Bayer's new drug hope, the cancer treatment Nexavar.

He does not expect any opposition to the deal from European or US regulators. With combined health-care sales of billion a year, the new company, Bayer-Schering Pharmaceuticals, will be Germany's largest drugmaker. The goal, according to Bayer Management Board Chairman Werner Wenning, is to create "a health-care heavyweight of international standing."

Analysts said the deal could kick off other deals among Germany's pharmaceuticals companies.Merck could find itself as a bidding target. Other medium-sized pharmaceuticals companies such as Altana could also find themselves vulnerable. Possible buyers for the businesses could be international drugs giants such as the UK's Glaxo Smithkline. Switzerland's Novartis is also seen as an acquirer.

The deal gives Bayer access to Schering's Yasmin, the world's top-selling oral birth-control drug. It will also get its hands on multiple sclerosis treatment Betaseron, which Schering expects will reach 1 billion euros in annual sales. The combined drugs business, to be called Bayer-Schering Pharmaceuticals, will have sales of 9 billion euros and be based in Berlin. Shares in Bayer were 1.6 percent higher, while Merck shares turned positive after the group ditched its Schering bid.