You'll have to fast forward to the very end of this video, but that is his supposition. Silly. Truly. Merck looks to be actually "beating a retreat" from "all [or most] things Schering".
Do also consider that Morningstar has long-recommended that its clients buy and hold Schering, and that much of that was bought at well-above $19 (mid-$20s, actually) -- so, this closing toss-away opinion may be read, at least in some measure, as an attempted price support -- as Schering closed above $19 last night, for the first time in a very long time (September 8, 2008, actually -- but who's keeping track?). As I pointed out on the Yahoo boards, today -- I think Schering is a bust-up play, at present:
. . . .The Question Actually Was: "Next on the Chopping Block. . . ."
. . . .Only then did the questioner "correct" himself -- remembering that Morningstar has staked a lot of reputation on Schering stock. Morningstar likes Schering above $19 -- where many of its clients bought in, last year -- and in 2007.
That said, I think the guy makes a case (at the very end of the video -- at about 4:15, into it), at least "as to patent cliffs" -- the problem with his supposition, though, is that he says the likely "acquiror" would be. . . wait for it: Merck.
Two words: No Way. Two more: No How. What of this would Merck want?
I think it more likely, as I have written -- repeatedly -- that Merck or others will pick-off the promising pockets they want, and refuse to "take out the rest of Fred's now-festering garbage" (i.e., Vytorin/Zetia; Claritin, etc.). Each of these generates good cash-flow, but the margins are dwindling -- especially in the OTC health segment.
So, the question might be rephrased as "Who needs good cash flow product lines (with lower relative profitability, but with longish patent tails)?"
In that scenario -- a bust-up is far more likely.
Even the Morningstar guy said Schering is likely "already in play."
That "play" is just not likely an intact merger of equals, in my opinion. . . .
My more specific analysis, is now available above.