German pharmaceutical and chemical company Bayer AG said on Thursday it would make a 16.3 billion euro (US$19.5 billion) white-knight offer for Schering, whose management said it would accept the offer over a hostile bid from Merck KgA.
The Leverkusen-based Bayer said in a statement that it would offer US$103 per share, topping a Merck offer of US$92.4 already rejected by Schering management.
Berlin-based Schering, which is not affiliated with New Jersey-based Schering-Plough, had opposed the US$17.9 billion takeover offer from Merck, saying that it doesn't accurately reflect its value.
Bayer said the deal would create a "heavyweight of international rank" with some US$10.8 billion in sales a year. Merck's bid for Schering had attracted attention because German pharmaceutical companies, once world leaders, had missed out on consolidation in the industry.
Schering CEO Hubertus Erlen said the price was right and the companies were a good fit.
"The Executive Board has carefully examined the proposal considering the interests of all stakeholders," Erlen said in a statement. "The price of US$103 per share in connection with several other important commitments is a good offer."
"Joining forces of Schering and Bayer will form a leading specialized pharmaceutical company. Both businesses are complementary and follow the same strategy. Together they will be even more competitive internationally."
Bayer's statement said it would finance the acquisition out of US$3.6 billion in existing liquidity in addition to a line of credit from Credit Suisse and Citibank. It said it would later refinance the line of credit through equity, debt and hybrid capital instruments.
"Bayer's acquisition of Schering AG would create a health care company of international standing," the Bayer statement said. "It would be consistent with Bayer's strategic focus on profitable pharmaceutical specialties, and would increase these products' share of pharmaceuticals sales from currently 25 percent to around 70 percent."
The takeover would be conducted through a subsidiary called Dritte BV GmbH.
"The Board of Management of Schering AG has declared its intention, subject to a further review of the offer documents, to approve the planned takeover offer by Dritte BV GmbH and recommend its acceptance to Schering AG stockholders," the Bayer statement said.