Merck & Co and Sanofi-Aventis drop plans to merge animal health operations; latter prices bond issue

In something of an embarrassing climb-down on plans to create the world’s biggest animal health company, pharma majors Merck & Co (NYSE: MRK) and Sanofi-Aventis (Euronext: SAN) have mutually agreed to scrap their accord to form a new joint venture with combined sales of some $5.5 billion. The aim had been to combine Merial, the animal health business of Sanofi with Intervet/Schering-Plough, Merck's animal health unit. As a result, each party will keep its current, separate animal health assets and businesses.

“Since the initial announcement about the intended combination on March 9, 2010, both companies have worked diligently to create the proposed animal health joint venture, including submitting requests for the required antitrust reviews,” noted a joint statement. The companies are discontinuing their agreement primarily because of the increasing complexity of implementing the proposed transaction, both in terms of the nature and extent of the anticipated divestitures and the length of time necessary for the worldwide regulatory review process.

Specifically, it seems that the US Federal Trade Commission has expressed concerns about the transaction, while it is understood that neither company had formally filed for approval by European competition authorities. The drugmakers had until the end of this month to terminate the agreement is without penalty to either party and each party is responsible for its own expenses.

Both firms committed to their animal businesses