German drugmaker Merck unveiled a surprise €10.6 billion deal to buy Elan rival Serono today.
Merck, which earlier this year failed in its bid to buy rival Schering, said it had struck a deal with Serono's founding Bertarelli family to buy their 64.5 per cent stake, and would make a public offer for the rest of the shares at the same price of 1,100 Swiss francs a share in cash.
The Bertarelli stake also gives Merck 75.5 per cent of the voting rights in Serono, and adds to earnings from next year.
The deal is the latest in a string of mergers among mid-sized drug firms, which are struggling to compete against industry giants such as Pfizer and GlaxoSmithKline.
Combined, Merck and Serono would rank as one of Europe's biggest drug groups with a market value of nearly $32 billion, based on the Serono takeover price, annual sales of almost $10 billion and a research budget of around $1.3 billion.
To finance the deal Merck plans to raise €2 billion to €2.5 billion in a share offer and issue a bond and a syndicated loan after paying through existing funds and bridge financing.
The deal comes after Serono's chief executive, Ernesto Bertarelli, had moved to seek takeover targets after abandoning attempts to find a buyer.