Drug Deal Goes Down Hoechst, Marion Merrell Dow Reach Agreement On $7.1 Billion Buyout
German chemical and drug giant Hoechst AG has finalized its long-negotiated buyout of drugmaker Marion Merrell Dow Inc. for $7.1 billion, the same price the companies suggested in February.
The all-cash deal is the largest U.S. acquisition ever by a German company and would create a drug maker with about $10 billion in sales, the two companies said Thursday.
If regulators approve, it would give Hoechst a foothold in the world’s biggest drug market.
The buyout throws a financial life preserver to Marion, which has been squeezing the last drops of profitability from drugs facing increasing competition from cheaper generics.
Drug maker earnings have been pressured by health care plans and insurers in the U.S. and governments overseas, all looking to curb costs. Thursday’s deal continues the two-year trend of mergers and consolidation that has been the industry’s response to the profit squeeze.
In February, Hoechst and Marion confirmed months of rumors when they announced they were considering a deal. Although the price remains the same, it could be easier to finance for Hoechst because the dollar’s steady decline this year has boosted the value of its German marks.
Hoechst will move up from the world’s fourth-largest drug company to the third-largest, behind Britain’s Glaxo-Wellcome PLC and the U.S.’s Merck & Co.
Hoechst will pay $25.75 a share for Kansas City-based Marion, first buying out Dow Chemical Co.’s 71 percent ownership stake before offering the same amount for all remaining shares.
Hoechst’s worldwide drug business will be conducted under the name of a new company, Hoechst Marion Roussel, to be based in Kansas City.
Hoechst Chairman Jurgen Dormann said the deal gives Hoechst “a partner with a strong North American sales network, contacts with the regulatory authorities, access to the innovative field of biotechnology research in the United States, a complementary product line and a strong clinical research effort.”