The all-cash deal will make Mylan one of the world's top generic-drug makers and give it a broad geographic reach. Merck's generics business sells drugs in more than 90 countries, and it ranked No. 3 in terms of global generic-drug sales last year. In 2006, it reported revenue of 1.8 billion euros, or about $2.44 billion, and adjusted earnings of 335 million euros, or about $453 million. The business employs about 5,000 people around the world.
Germany's Merck KGaA has no affiliation with
of the U.S.
Mylan has secured debt financing to pay for the deal but said it plans to reduce its debt in the "near term" by issuing $1.5 billion to $2.0 billion of equity and equity-linked securities. It will also suspend the dividend on its common stock.
According to Mylan, the deal will have a negative impact on its cash earnings per share in the first year after its completion, but will have a neutral effect in the second year and will boost cash EPS thereafter.
Mylan said it would retain Hank Klakurka, who is currently president and CEO of Merck Generics. Mylan also has signed long-term employment contracts with members of Merck Generics' senior management team.
"Mylan's acquisition of Merck Generics would substantially complete the execution on one of its long-term visions: to create a world class global quality generics leader," said Robert J. Coury, Mylan's vice chairman and CEO, in a press release. "Mylan is already a leader in the U.S., the world's largest market, and through Matrix Laboratories controls one of the broadest API platforms in the world. Merck Generics provides us with leading positions in many of the world's other key regions. Together, we will form a powerful, diverse, robust and vertically integrated generics platform."
Shares of Mylan ended Friday up 31 cents at $22.40.