3rd UPDATE: Merck Withdraws FTC Filing Over Schering, To Re-File

Drug maker Merck & Co. (MRK) said it withdrew its initial filing for U.S. antitrust clearance of its proposed $41 billion purchase of Schering-Plough Corp. (SGP), but plans to re-file with additional information as soon as possible.

Merck, based in Whitehouse Station, N.J., still expects to close the acquisition by end of the year, spokesman David Caouette told Dow Jones Newswires. He declined to specify the additional information Merck will provide or what led to the withdrawal of the initial filing.

The development may be nothing more than a procedural hiccup, and probably won't unravel the deal. Still, it represents a misstep in a merger process that has otherwise gone relatively smoothly.

Merck shares declined 34 cents, or 1.3%, to $25.40 Tuesday, while Schering shares were off 29 cents, or 1.2%, at $23.47.

In April, Merck filed information about its proposed acquisition with the U.S. Federal Trade Commission under the Hart-Scott-Rodino Act, which is designed to give the government time to review deals and ensure they aren't anti-competitive. Sometimes the FTC requires asset divestitures if two companies have overlapping businesses.

Cowen & Co. analyst Steve Scala said in a note Tuesday "one of the potential areas of overlap is Merck and Schering's animal-health businesses." Merck has a joint venture animal-health business with Sanofi-Aventis SA (SNY).

At a Deutsche Bank conference in Boston, Merck Chief Financial Officer Peter Kellogg confirmed that the antitrust review will focus on the animal-health business because it is a "highly overlapping area" for the companies.

Kellogg referred to the re-filing as part of the "normal process of working with the FTC and sorting through what information will be most helpful for their first review."

A 30-day waiting period for Merck's initial filing was set to expire Monday, May 18, Caouette said. But Merck decided to withdraw the filing Monday and will re-file soon, which will trigger another 30-day waiting period, he said.

"We believe the re-filing for us will provide a productive review process," Caouette said. "Other parties have taken similar actions in past transactions. We decided to re-file as part of our efforts to cooperate with the FTC in their review of the transaction."

Even when the new 30-day waiting period expires, it could be followed by a so-called second request for information from the FTC, which is relatively routine. In April, Pfizer Inc. (PFE) received a request for more information about its proposed acquisition of Wyeth (WYE). Pfizer also has said it may have to shed animal-health assets to get the deal done.

Cowen's Scala said a re-filing could help Merck avoid the delay and cost of complying with a second FTC request for information, although there's no guarantee of this.

Schering-Plough also continues to expect the deal to close by the end of the year, said spokesman Steve Galpin.

An FTC spokesman said the agency doesn't comment on any aspect of the pre-merger process, and that all filings and related actions are nonpublic.

-By Peter Loftus, Dow Jones Newswires; 215-656-8289; [e-mail]

(Thomas Gryta contributed to this story)