Germany’s Merck Makes a Bid for Domestic Rival

German drug and chemical maker Merck has made a cash bid for domestic rival Schering, Schering said Sunday.

In a brief statement, Schering said it had received an offer of 77 euros ($91.78) a share from Merck.

The executive board of Schering said the offer “significantly undervalues Schering and its prospects as an independent specialized pharmaceutical company.”

Although Schering did not term the bid hostile, it said the company “also confirmed the approach is unsolicited and that no negotiations are ongoing” with Merck.

The statement gave no further details and a spokesman for Darmstadt, Germany-based Merck was not immediately available for comment.

Schering Chief Executive Hubertus Erlen said he expected Merck to outline its offer Monday, and expressed dissatisfaction about the bid.

“We won’t recommend shareholders to accept the offer,” Erlen told Dow Jones Newswires.

According to a report on Manager Magazin’s website, the approximately 130 Merck family members who own 73% of the company would float 20% of their shares on the stock exchange and use the proceeds plus 2 billion euros ($2.38 billion) in cash in the bid for Berlin-based Schering. The remaining 27% of Merck is already publicly owned.

Schering is worth about 12 billion euros, Manager Magazin reported, saying the new company would have a market value of about 16 billion euros.

There has long been speculation that Schering may seek a merger with Merck or Germany’s Altana, but Schering Chief Financial Officer Joerg Spiekerkoetter sought to damp rumors last month, saying “neither company makes strategic sense to us.”

Founded in 1851 as a pharmacy, Schering has grown to a corporation that employs 24,500 people worldwide. Schering’s connection to its former U.S. subsidiary, New Jersey-based Schering-Plough, was broken during World War II and the companies are no longer related.

Merck was founded as a pharmacy in 1668, and the company is the oldest pharmaceutical business in the world. It has been entirely separate from the New Jersey-based Merck & Co. since the end of World War I.

Merck employs some 29,000 people.