Schering Prefers Bayer’s Bid Over Hostile Takeover Offer

German pharmaceutical and chemical company Bayer said Thursday that it would make a $19.5-billion white-knight offer for Schering, whose management said it would accept the offer over a hostile bid from another German drug company, Merck.

Leverkusen, Germany-based Bayer said in a statement that it would offer $103 a share, topping a Merck offer of $92.40 already rejected by Schering management.

Berlin-based Schering, which is not affiliated with New Jersey-based Schering-Plough, had opposed the $17.9-billion takeover offer from Merck, saying that it didn’t accurately reflect its value. Merck, based in Darmstadt, is independent of New Jersey-based Merck & Co.

Bayer said the deal would create a “heavyweight of international rank” with about $10.8 billion in sales a year. Merck’s bid for Schering had attracted attention because German pharmaceutical companies, once world leaders, had missed out on consolidation in the industry.

Schering Chief Executive Hubertus Erlen said the price was right and the companies were a good fit.

Bayer’s statement said it would finance the acquisition out of $3.6 billion in existing liquidity and a line of credit from Credit Suisse and Citigroup Inc.’s Citibank. It said it would later refinance the line of credit through equity, debt and hybrid capital instruments.

The statement said Bayer would merge Schering and its own pharmaceuticals business to form an independent division of the Bayer HealthCare subgroup.

Schering’s U.S.-traded shares rose $6.90, or 6.9%, to $107.20. Bayer’s shares gained 58 cents, or 1.4%, to $41.69.