Item
1.01. Entry into a Material Definitive Agreement.
On March
8, 2009, Merck & Co., Inc., a New Jersey corporation (“Merck”), entered into
an Agreement and Plan of Merger (the “Merger Agreement”) with Schering-Plough
Corporation, a New Jersey corporation (“Schering-Plough”), Blue, Inc., a New
Jersey corporation and wholly owned subsidiary of Schering-Plough, and Purple,
Inc., a New Jersey corporation and wholly owned subsidiary of
Schering-Plough. The Merger Agreement provides that, upon the terms
and subject to the conditions set forth in the Merger Agreement, Blue, Inc. will
merge with and into Schering-Plough, with Schering-Plough continuing as the
surviving corporation (the “Schering Merger”) and Purple, Inc. will merge with
and into Merck, with Merck continuing as the surviving corporation and
wholly-owned subsidiary of Schering-Plough (the “Merck Merger,” and together
with the Schering Merger, the “Mergers”).
The Merger
Agreement
At the
effective time and as a result of the Schering Merger, each share of common
stock, par value $0.50 per share, of Schering-Plough, issued and outstanding
immediately prior to the effective time of the Schering Merger will be converted
into and become exchangeable for 0.5767 shares of common stock of
Schering-Plough and $10.50 in cash. At the effective time and as a
result of the Merck Merger, each share of common stock, par value $0.01 per
share, of Merck, issued and outstanding immediately prior to the effective time
of the Merck Merger will be converted into one share of common stock of
Schering-Plough. At the effective time and as a result of the
Mergers, Schering-Plough will change its name to Merck & Co., Inc. (“New
Merck”).
Pursuant to the Merger Agreement, at the effective time of the Schering Merger,
all of the directors of Schering-Plough, other than three members reasonably
satisfactory to Merck, will resign, and the members of the Board of Directors of
Merck immediately prior to the effective time of the Schering Merger and such
other persons as Merck may designate in writing to Schering-Plough prior to the
closing will be elected by the directors of Schering-Plough to the Board of
Directors of New Merck effective upon the consummation of the Mergers.
Pursuant
to the Merger Agreement, except as indicated to Schering-Plough by Merck, the
Board of Directors of Schering-Plough will appoint each of the officers of
Merck immediately prior to the effective time of the Schering Merger as the
officers of New Merck effective upon the consummation of the
Mergers.
Merck and
Schering-Plough have made customary representations, warranties and covenants in
the Merger Agreement, including, among others, covenants (i) to conduct their
respective businesses in the ordinary and usual course during the interim period
between the execution of the Merger Agreement and consummation of the Mergers,
(ii) not to engage in certain kinds of transactions during such period, (iii)
that Merck will convene and hold a meeting of its shareholders to consider and
vote upon the approval of the Merck Merger, (iv) that Schering-Plough will
convene and hold a meeting of its shareholders to consider and vote upon the
Schering Merger and the approval of the issuance of the shares of common stock
of Schering-Plough required to be issued in the Mergers, (v) that, subject to
certain exceptions, the Boards of Directors of Merck and Schering-Plough will
each recommend approval of the Merger Agreement by its shareholders, (vi) that,
subject to certain exceptions, the Board of Directors of Schering-Plough will
recommend approval of the issuance of shares of common stock of Schering-Plough
by its shareholders and (vii) not to (a) solicit or knowingly facilitate
inquiries or proposals relating to alternative business combination transactions
or (b) subject to certain exceptions, engage in discussions or negotiations
regarding, or provide any non-public information in connection with, alternative
business combination transactions.
Consummation
of the Mergers is subject to customary conditions, including (i) approval of the
Merger Agreement by the holders of Merck common stock, (ii) approval of the
Merger Agreement and the issuance of the shares of common stock of
Schering-Plough required to be issued in the Mergers by the holders of
Schering-Plough common stock, (iii) absence of certain laws or orders
prohibiting the closing, (iv) expiration or termination of the Hart-Scott-Rodino
Act waiting period and obtaining antitrust approvals in certain other
jurisdictions, including the European Union, (v) declaration of the
effectiveness by the Securities and Exchange Commission of the Registration
Statement on Form S-4 to be filed by Schering-Plough and (vi) approval for
listing on the New York Stock Exchange of the shares of Schering-Plough common
stock issuable in the Mergers. Each party’s obligation to consummate
the Mergers is subject to certain other conditions, including (i) subject to
certain exceptions, the accuracy of the representations and warranties of the
other party, (ii) performance in all material respects of the other party of its
obligations and (iii) that there has been no “Material Adverse Effect” (as
defined in the Merger Agreement) on the other party. In addition,
Merck’s obligation to consummate the Mergers is subject to the condition that
any dispositions or other actions necessary to obtain required regulatory
approvals not result in a “Burdensome Condition” (as defined in the Merger
Agreement). Notwithstanding the satisfaction or waiver of the conditions to
closing, if the proceeds of the debt financing for the transaction are not
available in full, Merck will not be required to consummate the Mergers until
the financing is available in full.
The
Merger Agreement contains certain termination rights for both Merck and
Schering-Plough, including the right of Schering-Plough to terminate the Merger
Agreement to enter into an agreement for an alternative business combination
transaction that constitutes a “Superior Proposal” (as defined in the Merger
Agreement) if Schering-Plough complies with certain notice and other
requirements set forth in the Merger Agreement, including paying Merck a
termination fee of $1.25 billion and reimbursing Merck for its expenses, subject
to an agreed upon cap. The Merger Agreement further provides that
upon termination of the Merger Agreement under other specified circumstances,
Merck or Schering-Plough may be required to pay the other party a termination
fee of $1.25 billion and/or reimburse the other party for its expenses, subject
to an agreed upon cap. In addition, the Merger Agreement provides
that if all conditions to the Merger Agreement are satisfied, the Mergers are
not consummated by the “End Date” (as defined in the Merger Agreement) by reason
of the proceeds of the debt financing for the transaction not being available in
full, and Merck or Schering-Plough terminates the Merger Agreement, Merck will
be required to pay Schering-Plough a fee of $2.5 billion and reimburse
Schering-Plough for its expenses, subject to an agreed upon cap. The
remedy described in the prior sentence will be Schering-Plough’s sole remedy
against Merck with respect to or as a result of any failure to seek or obtain
the proceeds of the financing or any alternative financing and any event related
thereto. In addition, the Merger Agreement provides that under
specified circumstances, including if either party’s shareholders fail to
approve the transactions contemplated by the Merger Agreement, such party may be
required to reimburse the other party for its expenses, subject to an agreed
upon cap.
The
foregoing description of the Merger Agreement and the transactions contemplated
thereby is not complete and is subject to and qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached hereto as Exhibit
2.1 and the terms of which are incorporated herein by reference.
The
Merger Agreement has been included to provide investors and security holders
with information regarding its terms. It is not intended to provide any other
financial information about Merck, Schering-Plough, or their respective
subsidiaries and affiliates. The representations, warranties and covenants
contained in the Merger Agreement were made only for purposes of that agreement
and as of specific dates; were solely for the benefit of the parties to the
Merger Agreement; may be subject to limitations agreed upon by the parties,
including being qualified by confidential disclosures made for the purposes of
allocating contractual risk between the parties to the Merger Agreement instead
of establishing these matters as facts; and may be subject to standards of
materiality applicable to the contracting parties that differ from those
applicable to investors. Investors should not rely on the representations,
warranties and covenants or any description thereof as characterizations of the
actual state of facts or condition of Merck, Schering-Plough, or any of their
respective subsidiaries or affiliates. Moreover, information concerning the
subject matter of the representations, warranties and covenants may change after
the date of the Merger Agreement, which subsequent information may or may not be
fully reflected in public disclosures by Merck and Schering-Plough.
Financing
Commitments
On March
8, 2009, Merck entered into a commitment letter (the “Commitment Letter”)
pursuant to which JPMorgan Chase Bank, N.A. (“JPMorgan”) has committed to
provide (i) up to $3.0 billion under a 364-day unsecured bridge loan facility
(the “Bridge Loan Facility”), (ii) $3.0 billion under a 364-day asset sale
revolving credit facility (the “Asset Sale Facility”) and (iii) $1.0 billion
under a 364-day corporate revolving credit facility (the “Incremental Facility”
and together with the Bridge Loan Facility and the Asset Sale Facility, the “New
Facilities”). The commitment is subject to various conditions, including the
absence of any Material Adverse Change (as defined in the Commitment Letter) on
the combined company, the negotiation of definitive documentation with respect
to the New Facilities, satisfaction of a maximum debt to capitalization ratio,
and the other closing conditions set forth in the Commitment Letter. Under the
Commitment Letter, JPMorgan has agreed to support an amendment of the Merck’s
existing $1.5 billion Amended and Restated 5-Year Credit Agreement (the
“Existing Facility”) or to provide a replacement facility for the Existing
Facility, subject to the same conditions as the New Facilities.
The
foregoing description of the Commitment Letter and the transactions contemplated
thereby does not purport to be complete and is qualified in its entirety by
reference to the full text of the Commitment Letter a copy of which is attached
hereto as Exhibit 10.1 and the terms of which are incorporated herein by
reference.
Other
Information
Forward
Looking Statements:
This Current Report on
Form 8-K (including information included or incorporated by reference herein)
includes “forward-looking statements” within the meaning of the safe harbor
provisions of the United States Private Securities Litigation Reform Act of
1995. Such statements may include, but are not limited to, statements
about the benefits of the proposed merger between Merck and Schering-Plough,
including future financial and operating results, the combined company’s plans,
objectives, expectations and intentions and other statements that are not
historical facts. Such statements are based upon the current beliefs and
expectations of Merck’s and Schering-Plough’s management and are subject to
significant risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements.
The
following factors, among others, could cause actual results to differ from those
set forth in the forward-looking statements: the possibility that the expected
synergies from the proposed merger of Merck and Schering-Plough will not be
realized, or will not be realized within the expected time period, due to, among
other things, the impact of pharmaceutical industry regulation and pending
legislation that could affect the pharmaceutical industry; the ability to obtain
governmental and self-regulatory organization approvals of the merger on the
proposed terms and schedule; the failure of Schering-Plough or Merck
stockholders to approve the merger; the risk that the businesses will not be
integrated successfully; disruption from the merger making it more difficult to
maintain business and operational relationships; the possibility that the merger
does not close, including, but not limited to, due to the failure to satisfy the
closing conditions; Merck’s and Schering-Plough’s ability to accurately predict
future market conditions; dependence on the effectiveness of Merck’s and
Schering-Plough’s patents and other protections for innovative products; the
risk of new and changing regulation and health policies in the U.S. and
internationally and the exposure to litigation and/or regulatory actions.
Additional factors that could cause results to differ materially from those
described in the forward-looking statements can be found in Merck’s 2008 Annual
Report on Form 10-K, Schering-Plough’s 2008 Annual Report on Form 10-K and each
company’s other filings with the Securities and Exchange Commission (the “SEC”)
available at the SEC’s Internet site (www.sec.gov).
Additional Information:
In connection with the proposed
transaction, Schering-Plough will file a registration statement, including a
joint proxy statement of Merck and Schering-Plough, with the
SEC. Investors are urged to read the registration statement and joint
proxy statement (including all amendments and supplements to it) because they
will contain important information. Investors may obtain free copies of
the registration statement and joint proxy statement when they become available,
as well as other filings containing information about Merck and Schering-Plough,
without charge, at the SEC’s Internet web site (www.sec.gov). These documents
may also be obtained for free from Schering-Plough’s Investor Relations web site
(www.schering-plough.com) or by directing a request to Schering-Plough’s
Investor Relations at (908) 298-7436. Copies of Merck’s filings may be obtained
for free from Merck’s Investor Relations Web Site (www.merck.com) or by
directing a request to Merck at Merck’s Office of the Secretary, (908)
423-1000.
Merck and
Schering-Plough and their respective directors and executive officers and other
members of management and employees are potential participants in the
solicitation of proxies from Merck and Schering-Plough shareholders in respect
of the proposed transaction.
Information
regarding Schering-Plough’s directors and executive officers is available in
Schering-Plough’s proxy statement for its 2008 annual meeting of shareholders,
filed with the SEC on April 23, 2008, and information regarding Merck’s
directors and executive officers is available in Merck’s preliminary proxy
statement for its 2009 annual meeting of stockholders, filed with the SEC on
February 25, 2009. Additional information regarding the interests of
such potential participants in the proposed transaction will be included in the
registration statement and joint proxy statement filed with the SEC in
connection with the proposed transaction.
Item
9.01. Financial Statements and Exhibits.
(d)
Exhibits.