Merck/Schering Plough Merger Approved by The EU

Good Morning. The merger of Merck and Schering Plough has been approved by the EU and other approvals should be forthcoming in the weeks ahead. I have a position in Schering Plough and Merck but not nearly the size I had on the Pfizer/Wyeth combination. The reason being is that the spread on Pfizer/Wyeth was wider even though they had less overlap in their business. This was likely due to the larger deal size. There was simply not enough arb money to close the spread.

The closing of Pfizer/Wyeth was a boon for pharmaceutical stocks as there was a $44 billion cash component in the deal and some of that money found its way into other pharmaceutical stocks. In the Merck/Schering Plough tie up there is an $18 billion cash component. This should provide a boost to the pharmaceutical sector, but not to the degree that Pfizer/Wyeth did.

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