Monday, December 8, 2014

No Antitrust Concerns Re Cubist: Remember That Vancomycin Is Now Available As A Generic, Too. . .

I've said a few times here that Merck will likely be granted early termination of the Hart-Scott waiting period, related to the all cash $102 per share Cubist tender offer deal launched this morning. I believe that because over 70 percent of Cubist's revenue comes from Cubicin®, and that market place is quite fragmented, as the Merck slide grab at right shows. And Merck has no direct offering here. Note that there are several different manufacturers of generic "Vank" -- all subsumed in that one large (72 per cent) chunk of the US 2014 pie. So, Merck's acquisition won't materially affect the marketplace.

I'll also note that Merck is likely to keep its current debt ratings, stable to improving, even after issuing about $9 billion -- in order to take the legacy Cubist financing structure out. Merck will directly assume about $1 billion of Cubist's debt, and likely drop the interest rate on the whole $9 billion financing, near term. Sharp CFO-level management, that.

So -- this is a smart speedy deal, all the way round in my view. Kudos to all involved! [And I must grin, given that DeutscheBank got a chunk of the Merck M&A advisory and debt work. Shocking. Not.]

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