Germany’s Hoechst to Buy U.S. Drug Maker : Acquisitions: Deal for Marion Merrell Dow is latest in wave of mergers in the industry. This one is worth $7.1 billion.

In the latest in a wave of drug industry mergers giving foreign firms an ever-larger U.S. foothold, German chemical giant Hoechst on Thursday agreed to buy Marion Merrell Dow Inc. for $7.1 billion, or $25.75 a share, in cash.

The deal, months in the making, is the largest U.S. acquisition ever by a German firm.

Although the purchase would double Hoechst’s U.S. presence, the German company would emerge with only 2% of the drug market here.

Similarly, the just-completed merger of British drug makers Glaxo and Wellcome--history’s biggest pharmaceutical deal at $14.25 billion--makes that combined firm the world’s largest, but with a global market share of just 6%.

The last two years have seen nearly a dozen multibillion-dollar drug industry mergers, but analysts say the market share numbers indicate how much further the consolidation must go before any single player approaches dominance.

Faced with the rising research, legal and regulatory costs of bringing new products to market, as well as ongoing efforts to chop health care bills, pharmaceutical companies feel they must grow larger to survive.

“This merger portends more mergers and bigger mergers,” said analyst David F. Saks of Gruntal & Co. “Those in the Top 10 will eat up other members of the club.”

There is reason to expect that more European firms will take over their U.S. counterparts than the other way around, partly because the weak dollar makes American companies cheap, but also because the $60-billion U.S. market--despite the pressures of managed care--is still the world’s largest and most profitable.

Previous U.S. forays by European drug firms have included Swiss drug maker Roche Holding Ltd.’s 1994 purchase of Syntex Corp. for $5.3 billion and its 1990 acquisition of 60% of biotech firm Genentech Inc. for $2.1 billion. Also last year, French pharmaceutical firm Elf Sanofi bought Sterling Winthrop Inc.’s prescription drug business for $1.68 billion.

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The biggest such European drug acquisition remains the 1989 deal in which Beecham Group of Britain acquired SmithKline Beckman for $7.8 billion.

“There are still a lot of large foreign companies that don’t have a significant market presence in the United States that have been waiting in the wings to pounce,” said Steven B. Gerber of Oppenheimer & Co.

By buying American, foreign firms are also buying experience in operating in a managed-care environment, Saks said, noting that government-run health systems in Europe are investigating American-style cost-control techniques.

The acquisition announced Thursday would provide Hoechst with a large North American sales force, contacts with U.S. government regulators and a chance to integrate its generic drug maker, Copley Pharmaceutical Inc., with Marion Merrell Dow’s generic drug distributor, Rugby Group.

Despite its position as one of the 15 largest U.S. drug firms, Marion Merrell Dow languished on the selling block for a year without attracting much interest before the Hoechst deal.

The Kansas City, Mo.-based firm, 71% owned by Dow Chemical Corp., has been slow to develop new products to replace its stable of drugs with expiring patents. Among its best-known products are the Cardizem family of heart medicines and Seldane family of allergy drugs.

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Hoechst plans to rename the company Hoechst Marion Roussel and operate its worldwide drug business out of Marion Merrell Dow’s headquarters.

Under the agreement, Hoechst would acquire approximately 197 million Marion Merrell Dow shares held by Dow, for about $5.1 billion, and later make the same price offer to the remaining shareholders. The closing is expected to take place within 90 days, subject to government regulatory approvals.

“The sale of Dow’s interest in Marion Merrell Dow is consistent with our long-term strategy as the fit of pharmaceuticals into Dow’s portfolio has diminished,” said Frank Popoff, Dow chairman and chief executive.

Marion had a profit of $438 million last year on sales of $3.1 billion. Hoechst, with 1994 sales of $30.6 billion, earned $841 million.

Jean-Pierre Godard, currently head of Hoechst’s pharmaceutical division, would be in charge of the new business. Richard J. Markham, president and chief operating officer of Marion Merrell Dow, would become deputy head of pharmaceuticals at the new company.

Marion Merrell Dow shares closed at $25.125 on the New York Stock Exchange on Thursday, up 87.5 cents.

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Consolidating Medicine

The buyout of Marion Merrell Dow Inc. by German chemicals giant Hoechst is the second such merger this year, following history’s biggest pharmaceutical deal between Glaxo and Wellcome in January for $14.25 billion. Here are some other corporate mergers in the pharmaceutical industry:

Month / Year: May, 1995 Merger: Hoechst agrees to buy Marion Merrell Dow Inc. Amount Paid, in billions: $7.1

Month / Year: August, 1994 Merger: American Home Products Corp. acquires American Cyanamid Co. Amount Paid, in billions: 9.7

Month / Year: July, 1994 Merger: Eli Lilly & Co. buys PCS Health Systems Inc. Amount Paid, in billions: 4.0

Month / Year: May, 1994 Merger: Sandoz Ltd. buys Gerber Products Co. Amount Paid, in billions: 3.7

Month / Year: May, 1994 Merger: Roche Holding Ltd. acquires Syntex Corp. Amount Paid, in billions: 5.3

Month / Year: July, 1993 Merger: Merck & Co. buys Medco Containment Services Inc. Amount Paid, in billions: 6.6

Month / Year: December, 1989 Merger: Dow Chemical Co. acquires Marion Laboratories Inc. Amount Paid, in billions: 7.7

Month / Year: October, 1989 Merger: Bristol Myers Co. acquires Squibb Corp. Amount Paid, in billions: 11.5

Month / Year: July, 1989 Merger: Beecham Group acquires SmithKline Beckman Amount Paid, in billions: 7.8

Month / Year: February, 1988 Merger: Eastman Kodak Co. acquires Sterling Drug Inc. Amount Paid, in billions: 5.1

Source: Associated Press