Merck $8.4 billion takeover sends Cubist stock soaring

Merck will buy Cubist Pharmaceuticals for $8.4 billion, illustrating a new emphasis on combating so-called 'superbugs' that have drawn warnings from global health organizations. Shares of Cubist, based in Lexington, Massachusetts, soared before markets opened Monday while Merck slipped.

Matt Rourke/AP/File
Merck scientist Meizhen Feng conducts research in West Point, Pa. According to reports, Monday, Dec. 8, 2014, Merck will buy fellow drugmaker Cubist Pharmaceuticals for $8.4 billion.

Merck will buy Cubist Pharmaceuticals for $8.4 billion, illustrating a new emphasis on combating so-called "superbugs" that have drawn dire warnings from global health organizations.

Cubist Pharmaceuticals Inc. does advanced antibiotic research.

The World Health Organization warned in April that without a coordinated effort, "the world is headed for a post-antibiotic era, in which common infections and minor injuries which have been treatable for decades can once again kill."

“Cubist is a global leader in antibiotics and has built a strong portfolio of both marketed and late-stage pipeline medicines,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “Combining this expertise with Merck’s strong capabilities and global reach will enable us to create a stronger position in hospital acute care while addressing critical areas of unmet medical need, such as antibiotic resistance.”

“Combining with Merck is an exciting opportunity to accelerate Cubist’s established leadership in antibiotics and deliver significant, certain and immediate value to shareholders,” said Michael Bonney, chief executive officer of Cubist, said in a press statement. “We have a deep respect for Merck, and it is clear that they share our commitment to addressing the growing, global problem we are facing. Under Merck’s robust commercial platform, global reach and scientific expertise, we believe Cubist's programs can thrive. We’re proud of the company that our team has built and are confident that Cubist's important mission and focus on significant unmet medical needs will continue.”

Merck called Cubist a global leader in the development of antibiotics and said that the acquisition will help it address critical areas like antibiotic resistance.

The company, based in Whitehouse Station, New Jersey, said Monday that it will pay $102 per share of Cubist, a 37 percent premium to its closing price Friday.

Merck outlined the implications of the agreement for shareholders in a news release Monday: 

Under the terms of the agreement, Merck, through a subsidiary, will initiate a tender offer to acquire all outstanding shares of Cubist Pharmaceuticals, Inc. The closing of the tender offer will be subject to certain conditions, including the tender of shares representing at least a majority of the total number of Cubist’s outstanding shares (assuming the exercise of all options), the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. Upon the completion of the tender offer, Merck will acquire all remaining shares through a second-step merger without the need for a stockholder vote under Delaware law. The companies expect the transaction to close in the first quarter of 2015.

Merck expects the deal to add more than $1 billion of revenue to its 2015 base and it's expected to significantly add to profit in 2016 and beyond.

The transaction includes $1.1 billion in debt.

Shares of Cubist, based in Lexington, Massachusetts, soared before markets opened Monday while Merck slipped.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.