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If the financing for Merck’s $41.1 billion (£30b) takeover of rival drugmaker Schering Plough falls through, it will prove very expensive.
This probably will not happen, drug companies are cash rich and have gold plated credit ratings, but the global credit crisis is a growing cause for concern.
If the worst happens and Merck has to back out of the deal, it would have to pay Schering Plough $2.5 billion (£1.83b) as opposed to the $1.25 billion (£912 million) plus expenses that would normally be on the line.
And big as it is, the penalty does not compare with the $4.5 billion (£3.25b) that Pfizer would have to pay Wyeth if that planned acquisition falls apart.
JPMorgan Chase is funding Merck to the tune of $8.5 billion (£6.2b), consisting of $7 billion (£5.1b) in new loans and an amendment to an existing $1.5 billion (£1.1b ) line of credit.
The agreement also calls for Schering Plough to appoint three members to the board of the combined company. Merck now has 14 board members.
Copyright © Press Association 2009
