Mylan to buy Merck Generics Unit

Mylan Laboratories Inc. agreed to buy Merck KGaA's generic-drug unit for 4.9 billion euros ($6.7 billion) in cash to become the world's third-largest maker of generics.The acquisition will create a company with 2006 sales of about $4.2 billion. Mylan has arranged debt financing from Merrill Lynch & Co., Citigroup Inc. and Goldman Sachs Group, Inc. Mylan beat a rival bid by Teva, according to several people familiar with the transaction. Darmstadt, Germany-based Merck is selling the unit to pay down debt for its $13.7 billion acquisition of Serono SA.

The purchase, the biggest in generics since Teva Pharmaceutical Industries Ltd.'s $7.6 billion takeover of U.S.- based Ivax Corp. in January 2006, brings to an end a four-month battle for the world's fourth-largest maker of generics. The price Mylan is paying is more than five times its own sales in the year ended March 2007 of $1.26 billion and more than its own market capitalization of $5.39 billion. The acquisition comes almost two years after Mylan's failed $4 billion bid to buy King Pharmaceuticals Inc., the Bristol, Tennessee-based maker of the heart pill Altace. Mylan in January completed the $560 million purchase of a controlling stake in Secunderabad, India-based drugmaker Matrix Laboratories Ltd., giving the U.S. company access to lower-cost labor and materials. Mylan was the third-largest seller of generic drugs following Teva and Sandoz respectively. Actavis, Stada Arzneimittel AG, Ranbaxy and private equity bidders including Apax Partners Worldwide LLP and Bain Capital LLC also vied for the Merck unit, according to people with direct knowledge of the process.