German pharmaceutical giants Bayer and Merck are locked in an unprecedented takeover battle for control of rival Schering that could result in the break-up of the Berlin-based company.
Darmstadt's Merck made a hostile €77 per share takeover bid for Schering last March, only to be trumped by Bayer with an €86 per share offer - a 12 per cent premium - that got the blessing of the Schering board.
At the time, Leverkusen-based Bayer said that the €16.5 billion deal would only go through if it managed to acquire at least 75 per cent of Schering.
Bayer had already acquired 61.5 per cent of the company by the weekend, ahead of tomorrow's deadline, when it emerged that Merck had gone on a silent spending spree to acquire 18.6 per cent of Schering. The speculation over Schering's future has driven the company's stock well over the €86 offer price in trading yesterday, meaning that further purchases by Bayer might not be possible. It bought its last packet of 44.79 million Schering shares on the market last week for €3.8 billion.
Schering chief executive Hubertus Erlen said yesterday that the board still supported the Bayer bid, but anxiety was growing in Berlin yesterday.
"Higher takeover costs are generally costs that the employees have to shoulder, meaning that further jobs could be lost," said Norbert Deutschmann, head of the Schering works council.
The takeover battle has reawakened unpleasant memories of Vodafone's dramatic takeover battle for Germany's Mannesmann in 1999. That deal shattered the consensus-driven world of German business and continues to stir up controversy almost seven years later.
Mannesmann board members, including Deutsche Bank chairman Josef Ackermann, will go on trial a second time later this year accused by German state prosecutors of waving through the deal after huge payments were made to key Mannesmann managers.
The Schering takeover battle is unprecedented because it was Germany's family-owned Merck and not a foreign company or fund that initiated this ungentlemanly battle.
Even if Merck doesn't manage to acquire another 6 per cent to block the deal, analysts say it is in a good position to force a strategic deal with arch-rival Bayer.
"It seems Merck hasn't given up hope of taking over at least part of Schering," said Carsten Kunold, pharmaceuticals analyst with Merck Finck. "I can imagine that Schering will be broken up and that Bayer and Merck will divide up the company between them."
Merck has made no public statements about its intentions, but it is understood to be interested in Schering's cancer research as well as its sales network in the US and Japan.
Meanwhile shares in Bayer dropped 3.1 per cent to €32.06 yesterday as doubts grew over its takeover bid.
The Handelsblatt business newspaper reported that Bayer was considering an injunction to prevent Merck interfering in the bid.
