Expensive generics

14 May 2007 By Una Galani Follow @ugalani

The US drugs group is paying a hefty E4.9bn for the German unit, thereby leapfrogging rivals into number three spot in the industry. But for the deal to create value, Mylan must deliver its aggressive synergy targets. That won’t be easy.

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German pharmaceutical Merck announced Sunday the sale of its generics unit to Mylan Laboratories of the US for E4.9bn cash. In a competitive auction, Mylan is understood to have beaten Teva of Israel and a joint private equity offer from Apax and Bain Capital.

The proceeds will help Merck, which has net debt of E5.5bn, finance last year's E10bn acquisition of Switzerland's Serono. Investors will receive a special dividend. In 2006, Merck's generics unit reported sales of E1.8bn and operating profit of E307m.

Shares in India's Matrix, the active pharmaceutical ingredient platform 71% majorityowned by Mylan Laboratories, rose as much as 13% on the Bombay Stock Exchange. In New York, Mylan shares were down 14% in early trading.

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