LONDON Merck & Co Inc (MRK.N) and Sanofi-Aventis SA (SASY.PA) have begun selling parts of the businesses they are combining to form the world's largest animal-health operation, people familiar with the matter said.
Merck and its French partner -- which is also trying to buy U.S. rare-disease specialist Genzyme Corp GENZ.O -- are creating a powerhouse in veterinary drugs and vaccines, with $5.3 billion (3.4 billion pounds) in sales and almost a third of the global market.
The duo are merging Sanofi's pet-focussed Merial unit, which they once jointly owned, with Merck's bigger, livestock-oriented Internet business.
The two drugmakers are selling some product lines to allay competition concerns, offering smaller players in the $19 billion animal-health industry a last clear chance to bulk up.
Bidders are being offered the chance to buy products with about $500 million in combined annual sales, the people said, either in a single bundle or in several smaller packages.
Prospective buyers have received information packs and have about a month to lodge indicative bids, the people added. Morgan Stanley is handling the auction.
Gauging the value of the products offered, which are not standalone businesses, is difficult, but two of the people said they could fetch roughly 1.5 to 2.5 times sales, implying the auction could fetch $750 million to $1.25 billion.
"We will be proactive on divestitures in markets identified by our antitrust advisors as likely to require such divestitures. We will propose solutions to regulators," a Merck spokeswoman said in an email.
She said the two were preparing to file notifications with antitrust regulators in Europe and the United States, but added: "It would be premature to speculate about any eventual outcome."
Morgan Stanley declined to comment. Sanofi did not immediately respond to requests for comment.
Bidders are likely to include pharmaceutical groups Eli Lilly and Co (LLY.N), Bayer AG (BAYGn.DE) and Novartis AG NOVN.VX, the animal-health industry's third- to fifth-ranked firms, the people said.
Germany's Boehringer Ingelheim, the world's largest unlisted drugmaker, could also bid; it bought some animal-health assets divested by No. 2 player Pfizer Inc (PFE.N) last year. Smaller rivals such as Virbac SA (VIRB.PA) could also bid for parts.
In May Vetnosis, a consultancy, said it saw portfolio overlaps in vaccines for livestock, poultry, pets and horses; in products to kill parasites; and in specialty veterinary products, such as drugs to treat cardiovascular disorders.
(Additional reporting by Philipp Halstrick in Frankfurt, Ransdell Pierson in New York and Jessica Hall in Philadelphia; Editing by Will Waterman and David Holmes)