Intervet-Merial JV May Be Forced To Unload Cattle, Poultry Products, Analyst Says
03/08/2010 07:13AM
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Merck & Co. and Sanofi-Aventis SA, expected to combine animal health businesses into a joint venture within a weeks, probably will have to divest some products to satisfy government antitrust regulators, analysts say.
There are “areas of overlap” among the two companies’ products, primarily in cattle and poultry vaccines, said John Volk, senior consultant with Brakke Consulting, Inc., a Dallas, Tex.-based firm that serves the animal health industry. There will be “some weeding out” in those two categories, he said.
“Cattle and poultry vaccines are probably the biggest areas where they’ll have to do divestitures,” Volk said, referring to Merck and Sanofi. “Regulators will look most closely at whether the combined companies will have an overly dominant position in any one category.”
Merck’s Intervet animal health unit and its Sanofi counterpart, Merial, have little overlap in swine products, Volk said.
A decision on whether Merck and Sanofi will combine animal health units is expected in the next few weeks, spokesmen for the companies said March 3. Paris-based Sanofi, in Feb. 10 statement, said an Intervet-Merial combination was “highly probable.”
Antitrust regulators, such as the U.S. Federal Trade Commission and the Justice Department, often scrutinize corporate mergers and acquisitions to ensure one company doesn’t control too much of a market.
An Intervet-Merial joint venture would have “upwards of 25 percent” of the global animal health market, which generated $18.5 billion in revenue last year, Volk said. “That’s a substantial footprint.”
Current leader Pfizer Inc. has around 15 percent of the global market.
It isn’t yet known which, if any, products a Intervet-Merial joint venture may try to sell. The companies’ spokesmen declined to provide further details.
Merial’s cattle brands include Corid, Igenity, Ivomec, Reliant and Respishield. Intervet’s U.S. brands include Vista cattle vaccines, Revalor growth supplements and Safe Guard deworming products.
Most small- to mid-sized livestock producers probably will feel little impact from an Intervet-Merial joint venture, Volk said, because there are still several other competitors in the animal health industry, including Boehringer Ingelheim, Novartis AG and Pfizer.
“You have a lot of players in cattle vaccines, so I don’t see that as an area of major concern,” Volk said. “In most cases, there are alternative products from other companies. And in most cases, the buyer is going to have as much clout as they did before, because there will still be competition.”
A Merck-Sanofi joint venture would signify further consolidation in the animal health industry, with the number of companies shrinking in recent years partly because of rising costs to develop and gain government approval of drugs.
Merck and Sanofi’s animal health units generated a combined $4.77 billion in revenue in 2009. Merial, whose U.S. operations are based in Duluth, Ga., had $2.55 billion revenue in 2009, or almost 14 percent of the market.
Sanofi in September bought Merck’s 50 percent stake in Merial, the companies’ previously-formed veterinary partnership, for $4 billion. New Jersey-based Merck sold the 50 percent stake to assure regulatory approval of its purchase of Schering-Plough, which closed Nov. 4.
The agreement included an option for Sanofi to combine Merial with Intervet within about 100 days after Merck completed the Schering-Plough purchase.
Source: Bruce Blythe, Vance Publishing