Merck is serious about fending off counterbids for its proposed acquisition of Schering-Plough:
Folks, this is nowhere near a done deal. Fist of all, JNJ has been on an acquisition streak lately, so it may very well be inclined to submit a counterbid. Most of those buys have been for smaller medical device firms that fill holes in JNJ's existing product lines, so swallowing a major competitor whole would be a much larger strategic move. Second, Merck is not 100% sure it can come up with the necessary financing, which explains why the bid is partly in stock.
This may prove to be a potential special situation play for me, but right now there is too much risk that the deal will fall apart. I'll wait to see what JNJ does in response, if anything.
Nota bene; Anthony J. Alfidi does not hold any interest in MRK, SP, or JNJ at the time this commentary was published.
Merck & Co.’s agreement to buy Schering-Plough Corp. includes a termination fee of $1.25 billion if either company backs out, a penalty that may influence whether Johnson & Johnson makes a higher offer.
Also, if Merck fails to come up with the financing, it must pay Schering-Plough $2.5 billion and expenses, according to a document Merck filed today with the Securities and Exchange Commission.
Folks, this is nowhere near a done deal. Fist of all, JNJ has been on an acquisition streak lately, so it may very well be inclined to submit a counterbid. Most of those buys have been for smaller medical device firms that fill holes in JNJ's existing product lines, so swallowing a major competitor whole would be a much larger strategic move. Second, Merck is not 100% sure it can come up with the necessary financing, which explains why the bid is partly in stock.
This may prove to be a potential special situation play for me, but right now there is too much risk that the deal will fall apart. I'll wait to see what JNJ does in response, if anything.
Nota bene; Anthony J. Alfidi does not hold any interest in MRK, SP, or JNJ at the time this commentary was published.
