Sanofi-Aventis buys Merial; option exists to combine Merial and Intervet/Schering-Plough Animal Health

National Report

-- Sanofi-Aventis is buying Merck's ownership share of animal-health giant Merial. But that's not all -- the deal opens up an option to combine Merial and Schering-Plough Animal Health.

According to details of the deal released yesterday, Sanofi-Aventis will pay Merck $4 billion for 100 percent ownership of Merial, which was formed in 1997 as a joint venture between the two companies.

In addition, Merck, Sanofi-Aventis and Schering-Plough signed a call-option agreement, the companies report in a prepared statement. Under the terms of this call-option agreement, Sanofi-Aventis could combine the Intervet/Schering-Plough Animal Health business with Merial to form an animal-health joint venture owned equally by the new Merck and Sanofi-Aventis. This call option would follow the closing of the pending merger between Merck/Schering-Plough, the companies report.

"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," says Richard T. Clark, Merck chairman, president and chief executive officer. "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."

Christopher A. Viehbacher, chief executive officer of Sanofi-Aventis, adds, "We are pleased with the acquisition of Merial, a major global player in animal health, and the possibility of combining Merial and Intervet/Schering-Plough's complementary businesses. The combination would create a new leader in this $19 billion global animal-health market, supporting our vision of a global diversified healthcare leader. In an environment of increasing complexity, I am convinced that alliances have an important place, and I look forward to the prospect of further partnering with the new Merck in animal health to build on our longstanding relationship."