Sanofi, Merck & Co begin vet drugs sale: sources

By Quentin Webb

LONDON (BestGrowthStock) – Merck & Co Inc (MRK.N: ) and Sanofi-Aventis SA (SASY.PA: ) have begun selling parts of the businesses they are combining to form the world’s largest animal-health operation, people familiar with the matter said.

Merck and its French partner — which is also trying to buy U.S. rare-disease specialist Genzyme Corp (GENZ.O: ) — are creating a powerhouse in veterinary drugs and vaccines, with $5.3 billion in sales and almost a third of the global market.

The duo are merging Sanofi’s pet-focused Merial unit, which they once jointly owned, with Merck’s bigger, livestock-oriented Intervet business.

The two drugmakers are selling some product lines to allay competition concerns, offering smaller players in the $19 billion animal-health industry a last clear chance to bulk up.

Bidders are being offered the chance to buy products with about $500 million in combined annual sales, the people said, either in a single bundle or in several smaller packages.

Prospective buyers have received information packs and have about a month to lodge indicative bids, the people added. Morgan Stanley is handling the auction.

Gauging the value of the products offered, which are not stand-alone businesses, is difficult; but two of the people said they could fetch roughly 1.5 to 2.5 times sales, implying the auction could fetch $750 million to $1.25 billion.

“We will be proactive on divestitures in markets identified by our antitrust advisors as likely to require such divestitures. We will propose solutions to regulators,” Merck and Sanofi-Aventis said in a joint statement.

The companies were preparing to file notifications with antitrust regulators in Europe and the United States, the statement said, but added: “It would be premature to speculate about any eventual outcome.”

Morgan Stanley declined to comment.

Bidders are likely to include pharmaceutical groups Eli Lilly and Co (LLY.N: ), Bayer AG (BAYGn.DE: ) and Novartis AG (NOVN.VX: ), the animal-health industry’s third- to fifth-ranked firms, the people said.

Germany’s Boehringer Ingelheim, the world’s largest unlisted drugmaker, could also bid; it bought some animal-health assets divested by No. 2 player Pfizer Inc (PFE.N: ) last year. Smaller rivals such as Virbac SA (VIRB.PA: ) could also bid for parts.

In May Vetnosis, a consultancy, said it saw portfolio overlaps in vaccines for livestock, poultry, pets and horses; in products to kill parasites; and in specialty veterinary products, such as drugs to treat cardiovascular disorders.

(Additional reporting by Philipp Halstrick in Frankfurt, Ransdell Pierson in New York and Jessica Hall in Philadelphia; Editing by Will Waterman, David Holmes and Gerald E. McCormick)

Sanofi, Merck & Co begin vet drugs sale: sources