Sanofi-Aventis has dipped into its acquisitions warchest again and pulled out $4 billion to buy the 50% stake owned by Merck & Co in the companies’ animal health joint venture Merial.

The deal comes as no great surprise, seeing as how Merck is merging with Schering-Plough and was expected to divest some of the new entity’s animal health assets in order to get approval for the deal from antitrust bodies in the USA and Europe. Given that Sanofi and Merck have been working together on Merial since 1997, the French drugmaker was in pole position to take full control of the JV.

Sanofi said the $4 billion price tag is based on three times Merial’s 2008 sales and 10.2 times its earnings last year before interest and taxes. The acquisition should be accretive to the Paris-headquartered company’s adjusted net income from the first year.

In addition to taking full control of the JV and following the closure of the Merck/S-P deal, Sanofi would have an option to combine the Intervet/Schering-Plough Animal Health business, which specialises in treatments for livestock, with pet-based Merial, forming a new 50/50 JV, depending on regulatory approval.

As part of the agreement, the value of Merial has been fixed at $8 billion and the minimum total value received by the new Merck and its affiliates by contributing Intervet/S-P to the combined entity would be $9.25 billion, consisting of a floor valuation for Intervet/S-P of $8.5 billion and an additional payment of $750 million,

Merck chief executive Richard Clark said the agreements “should enable us to proceed expeditiously with the closing of our merger with S-P” and “also gain an outstanding animal health business”. His counterpart at Sanofi, Christopher Viehbacher, added that the firm is pleased with the acquisition “and the possibility of combining Merial and Intervet/Schering-Plough's complementary businesses”.

He added that the combination “would create a new leader in this $19 billion global animal health market, supporting our vision of a global diversified healthcare leader”. Mr Viehbacher concluded by noting that “ in an environment of increasing complexity, I am convinced that alliances have an important place”.

Pfizer and Wyeth, which hope to complete their merger soon, are also looking to sell off all or parts of their animal health businesses.