Antitrust Foresight Brings Speedy EU Approval Of Merck’s Acquisition Of Schering-Plough
The European Commission’s smooth approval of Merck & Co.’s $41 billion acquisition of rival Schering-Plough Corp. could be a textbook example of how parties to a merger or acquisition can get speedy clearance by anticipating – and remedying – antirust enforcers’ likely objections at the start.
One might have expected the union of these two heavyweights – which, if completed, will create the world’s second largest pharmaceutical company – to run into some problems with European Union antitrust authorities. Yet, on Friday, the Commission announced that it had cleared the merger, just one month after it was formally notified of it.
The Commission identified some overlaps between the parties’ human health products, including both marketed and pipeline drugs, such as treatments for allergic rhinitis and asthma. However, its investigation concluded that the overlaps were not sufficient to give rise to significant competition concerns in any EU Member State’s pharmaceutical market.
The real hurdle to the Commission’s clearance of the mega-merger could have been the combination of the parties’ animal health operations. But Merck had shrewdly eliminated this obstacle by divesting its 50% share in Merial, its animal health joint venture with Sanofi-Aventis. Sanofi-Aventis took over Merck’s stake in Merial in a transaction which, incidentally, had required – and received – separate approval by the European Commission in Case No. COMP/M.5614 – Sanofi-Aventis/Merial.
Had it failed to be proactive, Merck would have run the risk of the European Commission extending its review period or even opening an in-depth (so-called Phase II) investigation.
When parties to a merger fail to anticipate antitrust enforcers’ concerns, the result can be a delay in closing and the imposition of a less than palatable remedy, such as a rushed divestiture. That is why a growing number of parties to mergers that require antitrust approval wisely engage in discussions with antitrust agencies before giving formal notification of their deals, and sometimes take the initiative of offering divestments and finding an upfront buyer for their divested assets.
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