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The combined company will bear the name Merck after the transaction is completed. The deal was unanimously approved by the boards of directors of both conglomerates, a joint statement said.
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Under the terms of the agreement, Schering-Plough shareholders will receive 0.5767 shares and $10.50 in cash for each share of Schering-Plough.
Each Merck share will automatically become a share of the combined company, which will be headed by Merck chairman Richard Clark.
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When the transaction is complete, Merck shareholders are expected to own approximately 68 percent of the combined company and Schering-Plough shareholders 32 percent.
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Last year's combined revenue of the two companies totaled $47 billion. The merged entity is expected to have a cash and investments balance of approximately $8 billion.
Merck expects to achieve cost savings of approximately $3.5 billion annually beyond 2011 as a result of the transaction.
The merger will be financed with a combination of $9.8 billion from existing cash balances and a $8.5 billion loan by investment bank J.P. Morgan.
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"We are creating a strong, global healthcare leader built for sustainable growth and success," said
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"The combined company will benefit from a formidable research and development pipeline, a significantly broader portfolio of medicines and an expanded presence in key international markets, particularly in high-growth emerging markets."
He added that the merger will allow the new enterprise to invest in strategic opportunities and create "meaningful value" for shareholders.
Fred Hassan, chairman and CEO Schering-Plough, said the corporation was joining forces with Merck, its long-term partner in a cholesterol-fighting joint venture, to create a new leader in the pharmaceutical industry.
"By harnessing the strengths of both companies, the combined entity will be well-positioned to further deliver on our shared goal of discovering new therapies for patients to help them live healthier, happier lives," Hassan pointed out.
The transaction will double the number of potential medicines Merck has in the most advanced phase of development, bringing the total to 18.
Officials said the combined company will have a more diverse portfolio across important therapeutic areas, including cardiovascular, respiratory, oncology, neuroscience, infectious disease, immunology, women’s health and other areas.
Schering-Plough generates about 70 percent of its revenue outside of the
As a result, the merger will dramatically accelerate Merck's own international growth efforts, including the company's goal of reaching top five market share in targeted emerging markets, company officials said.
They pointed out that the combined company will have a more geographically diverse mix of business and is expected to generate more than 50 percent of its revenue outside the