tag:blogger.com,1999:blog-4241416962008169508.post4878071905132197430..comments2024-03-27T21:03:58.972-04:00Comments on Just A Life Sciences Blog...: Does Sanofi-Aventis ALREADY "Effectively Control" Merial Schering-Plough's Intervet?Unknownnoreply@blogger.comBlogger6125tag:blogger.com,1999:blog-4241416962008169508.post-12142392078276757012009-08-01T23:42:02.870-04:002009-08-01T23:42:02.870-04:00Okay -- as to the last Anonymous comment: Let'...Okay -- as to the last Anonymous comment: Let's get the figures agreed, first.<br /><br />Schering-Plough's Intervet (alone) was, according to several financial press sources, likely to fetch $8 to $9 billion, while the auction was proceeding "in secret" -- in June and July of 2009. Next, and importantly -- as an arms'-length bargain -- Sanofi has ALREADY agreed to pay $9.25 billion, for Intervet, if it exercises the option.<br /><br />Finally, Sanofi has agreed to pay $4 billion for HALF of Merial -- the half it does not already own.<br /><br />So, ALL of Merial is at least $7 billion, in value, even if we liberally assume that $1 billion of the $4 billion represents the "<i>control premium/synergy value</i>" of owning the whole Merial enterprise, rather than just a half of it. <br /><br />That -- the $7B plus $9B is actually $16 billion -- is where (I think) the other commenter's figures originate (at "$15 billion"). The general point remains the same -- it is (and would be) a mammoth force in Animal Health.<br /><br />With me so far? Good.<br /><br />Now, Section 7 of the Clayton Act prohibits any company (of a certain size) from acquiring another company (in any transaction of a certain size) when the deal might reasonably result in "a substantial reduction in competition" -- it is an "<i>effects</i>" test.<br /><br />While you are right, the FTC/DoJ will certainly get a chance to review this deal, should Sanofi ultimately elect to <b>exercise</b> the option, my concern is about what happens between now and then. There is a fairly high probability that the Schering-Plough Merck reverse merger will not close in 2009. It may well close in January or February of 2010. That means these current contractual "<i>tie-ups</i>" (or <i><b>prohibitions, on acts of outright competition</b></i>) will exist until June of 2010, as the 100 days on the option sorts itself out.<br /><br />That amounts to almost one full year -- a year during which Sanofi/Merial is assured that it can effectively veto any action of any real size (of more than one-percent of Intervet's size), that might hurt Merial's emerging positions. Of course, it is all dressed up, with the lipstick of ostensibly not hurting the value of Intervet's business -- but Sanofi/Merial need not explain itself -- it need only say "<i>no</i>".<br /><br />Next, an arbitration would ensue, about whether the refusal to consent was "<i>unreasonable</i>". Net, net -- it will allow Merial to delay Intervet's proposed action, essentially running out the clock -- until the game is over, and the Sanofi option is then fully-exerciseable. [Even if Sanofi never exercises the option, it may effectively hobble Intervet's ability to compete against Merial.]<br /><br />This could be something as simple as New Merck/Schering voting a pay increase, or incentive compensation enhancement, to all Intervet sales people -- to drive penetration by Intervet, into Merial territories.<br /><br />It could be something as serious as Intervet deciding to go head-to-head against Merial, in any one of about 40 product categories.<br /><br />All Sanofi/Merial need do, is cite Section 10.4, waggle its finger, and "<i>poof(!)</i>" -- New Merck's Intervet (or old Schering's Intervet) will have to take a seat on the bench -- rather than compete -- in the game.<br /><br />By June 30, 2010, Merial may have cemented enough of a lead in its core markets, that Intervet will never be a serious threat.<br /><br />That is the arguable Clayton Act Section 7 <b>effect</b> of letting this deal putter along, as is -- blithely relying on a future Hart Scott review -- to sort out the effect of the <b>EXERCISE</b> of the option -- as opposed to the effect of the <b>EXISTENCE</b> of it.<br /><br />The sheer size of these businesses, plus the very tight guardrails on permitted actions by Schering-Plough's Intervet, for what may amount to nearly a year, lead me to see a clear Clayton Act "<i>anti-competitive effect</i>" -- in the mere <b>GRANTING</b> of this option.<br /><br />I think I'll clean this up, and make it a new post. So -- in sum, I agree with the anonymous commenter, above who decried the emerging "<i>monopoly power</i>" here.<br /><br />NamasteCondorhttp://shearlingsplowed.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-19467609807147631352009-08-01T20:00:15.135-04:002009-08-01T20:00:15.135-04:00I don't see the 15B, but your point is taken. ...I don't see the 15B, but your point is taken. ISP is at 3B, Merial at 2.7B.Pfizer/Wyeth is at 3.4B. But I don't think the option agreement, which expires fairly quickly following the close of Merck/SP doesn't "circumvent" the FTC Hart-<br />Scott-Rodino process. If SA exercises its option to create a new Merial, the FTC will still need to approve that. And given the overlaps, that's where the problem will be.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-31849311681485197342009-08-01T14:36:43.646-04:002009-08-01T14:36:43.646-04:00wow, have you seen that SGP chart lately???
good ...wow, have you seen that SGP chart lately???<br /><br />good heavens!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-60705712402007375612009-08-01T11:16:13.444-04:002009-08-01T11:16:13.444-04:00How would the FTC allow this? Essentially S-A wan...How would the FTC allow this? Essentially S-A wants to side-step the FTC or circumvent US anti-trust and anti-competition laws, correct? <br /><br />In the EU, Merial and Intervet have almost the same product line. In the US, almost all vaccines are duplicates, even some Pharmas. <br /><br />This is not to mention the 2-3K people that would be "synergized" in the EU and USA. <br /><br />If this company combines you will see one huge AH company (worth 15 billion) and one smaller one - that being Pfizer AH (about 6 billion) with about 5 at 2 billion (700 million in sales). Talk about a complete monopoly.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-87280484225341155082009-08-01T10:13:12.596-04:002009-08-01T10:13:12.596-04:00Right. I am saying "the loud part softly"...Right. I am saying "<i>the loud part softly</i>", here, above. <br /><br />Listen to what an FTC/DoJ staffer hears:<br /><br />See, these agreements -- fairly construed, together -- begin to look like an attempt to carve up the Animal Health market, by what are now competitors.<br /><br />And those are attempts the Sherman and Clayton Acts generally frown upon.<br /><br />My audience on this piece is the hard-working, but overworked, career staff lawyers -- of the FTC's (and DoJ's) Antitrust division.<br /><br />NamasteCondorhttp://shearlingsplowed.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-32828616632864600442009-08-01T07:13:45.136-04:002009-08-01T07:13:45.136-04:00Pretty wordy, but I don't see it as a huge dea...Pretty wordy, but I don't see it as a huge deal. Typical concept -- SA doesn't want ISP to do anything stupid (or even anything all that important) while the option is still in play. SA clearly thinks the option will lead to a "new" Merial combining most of Merial and ISP. I'm more skeptical -- the overlapping product lines are pretty extensive, and Merck can basically pay off SA if it looks like the FTC will have a problem with the idea.Anonymousnoreply@blogger.com