Merck to Acquire Cubist Pharmaceuticals for $102 Per Share in Cash


December 8, 2014 7:00 am ET

Acquisition Augments Merck’s Strong Foundation and Opportunity for Growth in Hospital Acute Care Market

Merck (NYSE:MRK), known as MSD outside the United States and Canada, and
Cubist Pharmaceuticals, Inc. (NASDAQ:CBST) today announced that the
companies have entered into a definitive agreement under which Merck
will acquire Cubist for $102 per share in cash, which represents a 35
percent premium to Cubist’s average stock price for the most recent five
trading days.

Unanimously approved by the boards of directors of both companies, the
transaction has an equity valuation of $8.4 billion and will also
include $1.1 billion in net debt (based on projected cash balances) and
other considerations for a total transaction value of approximately $9.5

“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, Cubist. “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 in combating antibiotic-resistant bacteria. 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

For more than 20 years, Cubist has been committed to global public
health through the discovery, development and supply of antibiotics to
treat serious and potentially life-threatening infections caused by a
broad range of increasingly drug-resistant bacteria. Cubist’s antibiotic
CUBICIN®, the only approved once-a-day therapy for both S.
aureus bacteremia and complicated skin and skin structure infections
(cSSSI), has been used to treat more than two million patients and
continues to be an important therapy in the acute care environment.
Cubist’s in-line and late-stage pipeline of anti-infective medicines,
including ZERBAXA which is pending approval from the U.S.
Food and Drug Administration, will enhance Merck’s hospital acute care
business in a variety of therapeutic areas, including Gram-positive and
Gram-negative multi-drug resistant infections.

The acquisition of Cubist creates strong fundamental value with return
on capital in excess of Merck’s hurdle rate within a few years of
closing. Merck expects the acquisition to add more than $1 billion of
revenue to its 2015 base. While the transaction will be neutral to
non-GAAP EPS in 2015, Merck expects it to be significantly accretive to
non-GAAP EPS in 2016 and beyond. The acquisition will be accretive to
both Merck’s sales and earnings growth.

Cubist complements Merck’s strategy and the global
Merck launched last year, particularly in the area of
sharpening its commercial focus on key therapeutic areas that have the
potential to deliver the greatest return on investment. With the
company’s long-standing leadership in anti-infectives as well as its
customer-focused operating model, Merck identified the hospital acute
care segment as one of the company’s key priority areas in which it
believes it can have the greatest impact in addressing significant unmet
medical needs while delivering the greatest value to customers and

Merck strategically focused on acute care within the larger hospital
setting as a top priority because of the significant unmet need and the
unique opportunities for Merck to improve patient care and manage costs
in this setting with its in-line portfolio, promising pipeline and its
customer capabilities.

Hospitals are a central hub for healthcare delivery around the world and
currently represent 25 percent of overall healthcare spend. Merck
believes now is an optimal time to significantly grow its hospital acute
care presence because of the positive regulatory and reimbursement
trends in the hospital setting and the increasingly important role that
hospitals are expected to provide in healthcare overall.

For the first three quarters of 2014 compared to 2013, Merck’s hospital
acute care portfolio grew by more than 10 percent, excluding the impact
of foreign exchange. Key products in Merck’s hospital acute care
portfolio include several antibiotics and antifungals, as well as BRIDION®
(sugammadex), which is marketed outside the United States and is
currently under regulatory review in the United States. In addition,
Merck has continued to invest in its hospital acute care pipeline and
has several candidates, including actoxumab/bezlotoxumab (MK-3415A), an
investigational combination of therapeutic antibodies targeting two C.difficile
pathogenic toxins (A and B), which is being evaluated in clinical
trials for the prevention of recurrence of C.difficile infection;
and relebactam (MK-7655), an investigational class A and C beta-lactamase
inhibitor being evaluated in clinical trials for the treatment of severe
bacterial infections.

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.

Important Information about the Tender Offer

The tender offer for the outstanding shares of Cubist has not yet
commenced. This news release is for informational purposes only and is
neither an offer to purchase nor a solicitation of an offer to sell
shares, nor is it a substitute for the tender offer materials that Merck
and its subsidiary will file with the Securities and Exchange Commission
(SEC). At the time the planned tender offer is commenced, a tender offer
statement on Schedule TO will be filed by Merck with the SEC, and Cubist
will file a solicitation/recommendation statement on Schedule 14D-9 with
respect to the tender offer. The tender offer materials (including an
offer to purchase, a related letter of transmittal and other tender
offer documents) and the solicitation/recommendation statement will
contain important information that holders of Cubist common stock shares
are urged to read carefully when they become available, as each may be
amended or supplemented from time to time and because they will contain
important information that holders of shares of Cubist common stock
should consider before making any decision regarding tendering their
shares. The tender offer materials will be made available to Cubist’s
stockholders at no expense to them. In addition, all of those materials
(and other tender offer documents filed with the SEC) will be made
available at no charge on the SEC’s website at
Additional copies of the tender offer materials may be obtained at no
charge by contacting Merck at 2000 Galloping Hill Road, Kenilworth,
N.J., 07033 or by phoning (908) 740-4000. In addition, Merck and Cubist
file annual, quarterly and current reports and other information with
the SEC. You may read and copy any reports or other information filed by
Merck or Cubist at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C., 20549. For further information on the SEC public
reference room, please call 1-800-SEC-0330. Merck’s and Cubist’s filings
with the SEC are also available to the public from commercial
document-retrieval services and at the SEC’s website at

In this transaction, J.P. Morgan and Deutsche Bank served as financial
advisors to Merck, and Hughes Hubbard & Reed LLP and Baker & McKenzie
served as its legal advisors. Morgan Stanley & Co. LLC and Goldman,
Sachs & Co. served as financial advisors to Cubist, and Ropes & Gray
served as its legal advisor.

Investor Briefing Call

Merck will hold a call with institutional investors and analysts at 8:00
a.m. EST today, Dec. 8, 2014. Institutional investors and analysts can
participate in the call by dialing (706) 758-9927 or (877) 381-5782 and
using ID code number 48773641. Members of the media are invited to
monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using
ID code number 48773641. Journalists who wish to ask questions are
requested to contact a member of Merck’s Media Relations team at the
conclusion of the call.

About Merck

Today’s Merck is a global healthcare leader working to help the world be
well. Merck is known as MSD outside the United States and Canada.
Through our prescription medicines, vaccines, biologic therapies and
animal health products, we work with customers and operate in more than
140 countries to deliver innovative health solutions. We also
demonstrate our commitment to increasing access to healthcare through
far-reaching policies, programs and partnerships. For more information,
and connect with us on Twitter,
and YouTube.

Merck Forward-Looking Statement

This news release includes “forward-looking statements” within the
meaning of the safe harbor provisions of the United States Private
Securities Litigation Reform Act of 1995. Forward-looking statements
include statements regarding the timing and closing of the tender offer
and the merger transactions, the ability of Merck to complete the
transactions considering the various closing conditions, and any
assumptions underlying any of the foregoing. These statements are based
upon the current beliefs and expectations of Merck’s management and are
subject to significant risks and uncertainties. There can be no
guarantees with respect to pipeline products that the products will
receive the necessary regulatory approvals or that they will prove to be
commercially successful. If underlying assumptions prove inaccurate or
risks or uncertainties materialize, actual results may differ materially
from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry
conditions and competition; general economic factors, including interest
rate and currency exchange rate fluctuations; the impact of
pharmaceutical industry regulation and health care legislation in the
United States and internationally; global trends toward health care cost
containment; technological advances, new products and patents attained
by competitors; challenges inherent in new product development,
including obtaining regulatory approval; Merck’s ability to accurately
predict future market conditions; manufacturing difficulties or delays;
financial instability of international economies and sovereign risk;
dependence on the effectiveness of Merck’s patents and other protections
for innovative products; the exposure to litigation, including patent
litigation, and/or regulatory actions; timing of the tender offer and
merger; uncertainties as to how many Cubist stockholders will tender
shares in the tender offer; the possibility that competing offer may be
made; the possibility that various closing conditions to transactions
may not be satisfied or waived, including that a governmental entity may
prohibit, delay or refuse to grant approval for the consummation of the
transactions; or that a material adverse effect occurs with respect to

Merck undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or
otherwise. Additional factors that could cause results to differ
materially from those described in the forward-looking statements can be
found in Merck’s 2013 Annual Report on Form 10-K and the company’s other
filings with the SEC available at the SEC’s Internet site (

About Cubist

Cubist Pharmaceuticals, Inc. is a global biopharmaceutical company
focused on the research, development, and commercialization of
pharmaceutical products that address significant unmet medical needs in
the acute care environment. Cubist’s corporate headquarters is based in
Lexington, Massachusetts, with international headquarters located in
Zurich, Switzerland. Additional information can be found at Cubist’s web
site at
Also, connect with Cubist on Twitter @cubistbiopharma
and @cubistcareers,
or YouTube.

Cubist Forward-Looking Statement

This press release contains forward-looking statements. Any statements
contained herein which do not describe historical facts, including but
not limited to, statements regarding the timing and closing of the
tender offer and the merger transactions and the ability of Cubist to
complete the transaction are forward-looking statements which involve
risks and uncertainties that could cause actual results to differ
materially from those discussed in such forward-looking statements. Such
risks and uncertainties include, among others: the risk that Cubist
stockholders will not tender shares in the tender offer; the possibility
that competing offers may be made; the possibility that various closing
conditions may not be satisfied or waived; or that a material adverse
effect occurs with respect to Cubist; and those additional factors
discussed in Cubist’s most recent Annual Report on Form 10-K and
subsequent Quarterly Reports on Form 10-Q filed with the SEC. Cubist
cautions investors not to place considerable reliance on the
forward-looking statements contained in this press release. These
forward-looking statements speak only as of the date of this document,
and Cubist undertakes no obligation to update or revise any of these

Media Contacts:
Lainie Keller, 908-406-1459
Steve Cragle, 908-740-1801
Investor Contacts:
Joe Romanelli, 908-740-1986
Justin Holko, 908-740-1879
Media Contact:
Julie DiCarlo, 781-860-8063
Investor Contact:
Eileen C. McIntyre, 781-860-8100

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