UCB agrees to acquire Schwarz Pharma for $5.6bn

Stretching the trend of merger in the Pharma sector, a Belgian biopharmaceutical manufacturer, UCB announced Monday that it has agreed to buy Monheim, Germany-based Schwarz Pharma for 4.4 billion euros ( $5.6 billion) in shares and cash, making it the third major drug sector transaction in Germany in five days.

In a spree of consolidation, the first was Merck KGaA, which on Thursday had announced a surprise 7 billion pounds ($13.3 billion) bid for Swiss biotech firm Serono. Also last weak, another German group, Altana, said it had agreed to surrender its drugs subsidiary to unlisted Danish firm Nycomed for around 4.5 billion euros (3 billion pounds).

UCB’s cash and shares deal with Schwarz will unite the second-tier drugmakers to create a biopharma major with annual sales of more than 3.3 billion euros (2.2 billion pounds) and with a research and development budget of 770 million euros (517 million pounds). The deal would also help drugmakers to develop a promising neurology and inflammation drug pipeline.

Under the deal, which values Schwarz Pharma at 91.10 euros a share (4.4 billion euros, 3 billion pounds), 20 percent more than the UCB’s closing price on Sept. 22, Schwarz shareholders will receive 50 euros a share in cash and 0.8735 of new UCB shares for each of their Schwarz Pharma shares.

Expecting to complete the deal by the end of current year, Brussels based UCB said, “The enlarged UCB would be a more attractive partner for licensing deals and R&D collaboration than either Schwarz Pharma or UCB alone."

The Schwarz-Schuette family, which possesses 60% of the German Company, supported the bid proposal. The deal is set to be unanimously recommended by the board of Schwarz Pharma and it will also see that the Schwarz family retain at least 41.5% of its UCB shares until after June 2010. The new shares will be placed on the Euronext Brussels exchange.

The deal came after the last week news, that Schwarz family had been seeking a buyer.

After the deal announcement, shares in UCB slipped 2.08% at 46.07 euros, while Schwarz Pharma was up 16.72% at 88.10 euros at 07:12 GMT (8:12 a.m. British time).

Meanwhile, market analysts forecast further mergers in the sector, as smaller, family-controlled firms, are forced to hunt partners to survive in midst of the surging cost of developing new drugs.