STOCKHOLM -- Astra AB said yesterday that it will buy Merck & Co.'s half of their U.S. sales venture for at least $4.4 billion in cash, paving the way for Sweden's biggest drugmaker to consider merging with a rival.
Astra, maker of the world's best-selling drug, the ulcer treatment Prilosec, will lend the No. 1 U.S. drugmaker $1.4 billion when the agreement is signed July 1. Astra will pay at least $4.4 billion -- or more, depending on sales -- in 2008, the earliest that it can buy the stake.
Astra is looking for a merger partner and the Merck venture was in the way. While yesterday's accord lets Merck keep a share of Astra's U.S. sales for 10 years, and longer for Prilosec, it gives Astra control of the Astra Merck Inc. operations right away.
In the event of a merger, Astra can buy out Merck's rights to new products by paying as much as $1.5 billion.
"It gives Merck some protection and it gives Astra the possibility of freedom," said Leonard Yaffe, an analyst with NationsBanc Montgomery Securities.
Whitehouse Station, N.J.-based Merck fell $2 to $126.875. Swedish markets were closed for a national holiday. Astra's American depositary receipts rose 56.25 cents to $21.0625.
"This is fantastic for Merck," said Steve Lisi, an analyst at Mehta Partners. "They were definitely in the driver's seat."
The transaction brings in cash that Merck said it will use for "general corporate purposes." Last month, the maker of the cholesterol drugs Zocor and Mevacor agreed to sell its stake in a venture with DuPont Co. for $2.6 billion, giving it additional cash to beef up research operations or buy back stock.
For Merck, the new pact guarantees that it will receive some money even if Prilosec sales plunge when its patent runs out early in the next decade. Merck also faces patent loss on four other drugs with a combined $5.38 billion in 1997 sales.
"This is a very favorable agreement for Merck," said Judy Lewent, Merck's chief financial officer, in a conference call. The U.S. company said it expects the transaction "to yield more revenue and income" than it would have received under the previous venture.
Merck will pay 6 percent interest on the $1.4 billion Astra loan, which the Swedish company will write off as goodwill over 20 years, Lewent said.
Astra will take control of the venture and shoulder all costs.
Pub Date: 6/20/98