Bayer on the verge of Schering buyout

BAYER look set to win the bid for drugmaker Schering, at €16.3 billion, after rival Merck pulled out of the race for top spot in Germany’s drugs industry.

Merck, whose €77-a-share offer for Schering was trumped late last week by Bayer's white-knight bid of €86, said it would walk away from the planned takeover because a higher price was not justified.

If Bayer's bid goes through, it will create a group with sales of around €15 billion, putting back on the map a German drugs industry that has lost its one-time status as chemist to the world.

Analysts welcomed the deal, saying it would improve profit margins and reduce Bayer's exposure to economic cycles.

The deal gives Bayer still smarting from a $1 billion recall of cholesterol drug Baycol in 2001 access to Schering's Yasmin, the world's top-selling oral birth-control drug. It will also get its hands on multiple sclerosis treatment Betaseron, which Schering expects will reach €1 billion in annual sales.

The combined drugs business, to be called Bayer-Schering Pharmaceuticals, will have sales of €9bn and be based in Berlin.

The pullout leaves Merck, a 338-year-old group, desperately seeking ways to get bigger. It said it would continue to assess all options to boost its pharmaceuticals and chemicals units but it is not interested in Germany's Altana, which itself is examining options for its drugs unit.

Bayer said the union could result in as much as 6,000 job cuts as the two firms remove overlaps at production sites and join forces in research and development.

Bayer chief executive Werner Wenning said the combined company would use Schering's network in the United States to market Bayer's new drug hope the cancer treatment Nexavar.