Bayer completes €17 bln takeover of Schering


Bayer AG completed its €17 billion takeover of German rival Schering AG, creating the country's largest drugmaker.

Bayer now controls 92.4% of Schering, the Leverkusen, Germany-based company said today in a statement. That misses the 95% threshold required to be able to force other shareholders to sell their stakes and delist Schering. “We're still aiming to acquire the entire stock of Schering,” Chairman Werner Wenning said in the statement. “But we're not in a hurry.” Schering will help bolster Bayer's health-care unit with the multiple sclerosis treatment Betaseron and the world's biggest stable of birth-control pills. Growth at the enlarged company will be led by new products and demand for cancer drugs such as Bayer's Nexavar, Wenning has said. Bayer also has farm chemicals and material science units. The company expects to gain almost half of its revenue from health-care products, up from just more than 33%. Schering will remain a member of Germany's benchmark DAX index for now, Bayer spokesman Guenter Forneck said in an interview today. That blocks Bayer's German rival Merck KGaA from moving into the index. “Merck would have had the best chances for the slot,” Silke Stegemann, an analyst at Landesbank Rheinland-Pfalz, said in a note to clients today. Schering will probably leave the DAX in September, Stegemann said, giving Deutsche Postbank AG, Germany's biggest consumer bank by clients, a better shot of joining the index. Schering will be included in Bayer's financial reporting. Bayer will delay the publication of its second-quarter results until Aug. 29 and hold an extraordinary shareholders meeting in September, the company said. Bayer sold € 1.2 billion in new shares last week. This was one of the final steps in financing the purchase after Bayer sold its medical diagnostics unit to Siemens AG and issued bonds worth €6.3 billion, including €2.3 billion of convertible bonds. The company said it plans to sell its HC Stark and Wolff Walsrode units. Shares of Bayer rose 15 cents, or 0.4%, to €37 at the close of trading in Frankfurt. Merck shares fell 32 cents, or 0.5%, to €67.38, and Schering shares rose €1.61 to €90.78. The extra yield investors demand to hold Bayer's 6% euro-denominated bond due in 2012 instead of government bonds rose to 65.9 basis points, according to RBC Capital. This is lower than the 68 basis points the spread hit when Standard & Poor's put the company's debt on credit watch for downgrade on March 24. Bayer AG's credit rating was cut two steps by Standard & Poor's Ratings Services yesterday. Bayer's long-and short-term corporate credit rating was lowered to “BBB+/A-2” from “A/A-1”. Berlin-based Schering also had its ratings lowered to “BBB+/A-2” from “A/A-1.” Both companies' ratings were removed from CreditWatch, where they were placed in March. (Bloomberg)
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