Merger motives

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The announcement of the proposed merger of Boots Group PLC with Alliance Unichem on 3rd October 2005, will result in the creation of UK's largest pharmaceutical company. When completed, the combined companies will own a 40 percent market share of the wholesale and a 17 percent share of the pharmacy market (BBC, 2005).


The product and market differences currently enjoyed by Boots and Alliance, will merge together in the hopes of stimulating greater growth than could be expected as separate entities. Their confidence in growth in shown by the fact that they will be paying 2.5 times of dividend despite the two companies having different dividend policies. It is aimed that the merger will be finalised in April 2006. Most companies, if not all, do mergers because they expect to perform better and be worth more together than as being apart. There are numerous benefits that companies gain from mergers and the Boots-Alliance deal is no different.
Alliance had long ago announced that its plans for growth included acquisitions and mergers. With a history of acquiring patents and new pharmaceuticals to add to their product line, the addition of the Boots health and beauty line will be an appropriate addition to spur revenue growth. Alliance's drug pipeline, though not dry, has few new pharmaceuticals on the horizon. Isprelor, a new delivery method for the existing drug Misoprosol, is set for release sometime in 2006. Posidorm, a synthetic Melatonin, has entered late stage trials and hopes are for a 2007 release date (Alliance-Unichem). Posidorm, if approved, is expected to increase the Boots-Alliance revenue stream by as much as 20 percent in 2008.
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