The New York desk of London's Financial Times has a few new, well-sourced, but still-purported, bits of the Johnson & Johnson* puzzle, out tonight.
To the FT story, I might add that [and, honestly, I had hoped to hold this lil' tidbit until Monday morning! Dang!] Monday, March 30, 2009 should be circled -- in red -- on Schering-Plough, and Merck, calendars -- for that is probably when J&J may first demand arbitration of its Remicade [and Simponi] reversionary rights. [Here are my twin backgrounders -- of March 10, March 12 and March 9 -- on this.]
Do go read it all, but here are the snippets I found most intriguing:
. . . .Johnson & Johnson is preparing a push to extract concessions from Schering-Plough in exchange for allowing Merck’s planned. . . takeover of Schering to move forward without a messier fight, dealmakers say. . . .
. . . .While the arthritis franchise is important to Merck, its interest in Schering is broad and includes Schering’s strengths in treating cardiovascular disease. Merck could agree to carve out the arthritis venture and trade it to J&J –- which may hand J&J the asset it wants most without forcing it to buy the rest of Schering.
Bankers pointed out, however, that such a transaction could have been worked out before Merck and Schering announced their merger if the parties had been willing, suggesting that any battle over Schering’s assets may grow complicated. . . .
Should be entertaining.
SOME LATER THOUGHTS:
Trading on the NYSE on Monday will be fascinating. [There was heavy-volume, after-hours, on Friday night, in the NASDAQ session, in both Merck and Schering-Plough. Hmmmm.] I do think the bankers quoted in the FT piece, above, are perfectly spot-on in suggesting that, IF it had been deemed "possible" to do an quick, easy, "friendly" deal between Johnson & Johnson CEO Weldon, and Merck CEO Clark -- before March 9, 2009 (the announcement date of the proposed merger) -- these parties would have already done one.
The rather dark implication is that a "friendly" Remicade/Simponi reversion/increased license-fee/royalty rate deal was not viewed as possible, on one side -- or the other.
I guess a third possibility would be that CEOs Clark and Hassan were running so fast, they didn't bother to ask Weldon at all.
That would seem to be at least an arguable breach of the officers' fiduciary duty of due care (and loyalty?), though. When the SEC merger proxies and registration statements are filed in a few weeks (by Schering-Plough and Merck, respectively), we'll be able to read much more of the history of these negotiations. Or non-negotiations.
We'll also learn whether Schering-Plough has sought, and paid for, a so-called "fairness opinion" -- that the deal is fair, from a financial point of view, to Schering-Plough shareholders. Will its lead banker give that opinion, or a banker without any "skin" in the deal? I dunno. [Editor's Note: Here is an example of what one JP Morgan version of a property catastrophe reinsurance industry "fairness" opinion looks like -- in a March 2009 transaction.]
That would be a tough opinion to render if, by then, Johnson & Johnson CEO Bill Weldon has stepped in -- to arbitrate a "claw back" of the Remicade/Simponi rights.
Note that if a banker is going to give that "fairness" opinion, it will need to discuss, in the very-public SEC filings, all the weaknesses in SGP's present stand-alone businesses, to reach the conclusion that this price was "fair". [And CEO Hassan would never want all of that made public!]
My bet? There will be no fairness opinion (in part because it would be atrociously-expensive, from a reputable bank, in this setting) -- and the Schering-Plough Board of Directors will be sitting in a tough spot (placed there, by CEO Hassan, no less!) -- trying to defend the fairness of this deal -- while facing pending class-action suits from large institutional investors -- alleging that the deal is unfair. We'll see.
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