Mylan Laboratories to Acquire Generics Business of Merck KGaA

Mylan Laboratories to Acquire Generics Business of Merck KGaA

May 14, 2007

-- Combination Creates a World Class Global Generics Leader
 
-- Significant Scale and Breadth Will Drive Major Operating
Efficiencies  
-- Highly Complementary Transaction Further Strengthens
Mylan's Product Portfolio  
-- Accelerates Mylan's Revenue and Earnings Growth  
-- Anticipated to be Cash EPS(1) Neutral in 2nd Full Year 


    PITTSBURGH, May 14 /Xinhua-PRNewswire/ -- Mylan
Laboratories Inc. (NYSE: MYL) and Merck KGaA today
announced the signing of a definitive agreement under which
Mylan will acquire Merck's generics business ("Merck
Generics") for EUR 4.9 billion (US$6.7 billion) in an
all-cash transaction.  The combination of Mylan and Merck
Generics will create a vertically and horizontally
integrated generics and specialty pharmaceuticals leader
with a diversified revenue base and a global footprint. On
a pro forma basis, for calendar 2006, the combined company
would have had revenues of approximately US$4.2 billion,
EBITDA of approximately US$1.0 billion and approximately
10,000 employees, immediately making it among the top tier
of global generic companies, with a significant presence in
all of the top five global generics markets. 

    In addition to retaining Hank Klakurka, currently
President and CEO of Merck Generics, Mylan has executed
long-term employment agreements with members of Merck
Generics' senior management team, ensuring that senior
leadership remains intact.  Mylan views the existing
management and employees of Merck Generics as key to the
success of the combined company.

    Robert J. Coury, Mylan's Vice Chairman and Chief
Executive Officer, commented: "Mylan's acquisition of
Merck Generics would substantially complete the execution
on one of its long-term visions:  to create a world class
global quality generics leader.  The fit between our two
companies is truly outstanding.  Mylan is already a leader
in the U.S., the world's largest market, and through Matrix
Laboratories controls one of the broadest API platforms in
the world.  Merck Generics provides us with leading
positions in many of the world's other key regions. 
Together, we will form a powerful, diverse, robust and
vertically integrated generics platform.  

    (1) Cash EPS represents EPS adjusted for amortization
expense related to
        intangible assets.

    The combination with Merck Generics will significantly
extend our range of therapeutic categories and dosage
forms, and bring us a number of new, differentiated
products and successful franchises."  

    Merck Generics is a subsidiary of Merck KGaA, a more
than 300-year old global chemical and pharmaceutical
conglomerate.  Merck Generics has sales in more than 90
countries and is the world's number three ranked generics
business by 2006 calendar year revenues.  It has more than
400 high quality products and 70% of its revenues are
generated from countries where it is a top three player. 
Merck Generics' U.S. specialty pharmaceuticals business,
Dey, is focused on respiratory and allergy products and had
US$650 million in revenues in 2006.  Merck Generics reported
sales of EUR 1.8 billion (US$2.45 billion) and EBITDA of EUR
335 million (US$450 million) in 2006. The business employs
approximately 5,000 people worldwide.  

    Hank Klakurka, President and CEO of Merck Generics,
said: "My management team and I are extremely excited
to be joining the Mylan team.  We believe Mylan is the best
possible acquirer for our company. The two businesses are an
excellent fit in terms of geography and product mix, and
together we can offer extremely attractive product baskets
across our combined territories. Mylan has established
itself as a leader in the U.S. in terms of quality,
manufacturing excellence and customer service, and has
demonstrated a strong commitment to its employees and the
communities in which it operates.  My team and I look
forward to working with Mylan to build an undisputed world
leader in quality generics." 

    Strategic Rationale

    The acquisition offers a unique, compelling opportunity
to create a global generics leader with critical mass in
most of the important generics markets.  The transaction
positions Mylan to leverage substantial growth
opportunities and maximize operating efficiencies driven by
global scale.

    -- Leadership and scale in key global regions: The
transaction creates 
       critical mass by combining Mylan's leading position
in the U.S. with 
       Merck Generics' broad geographic mix, including
leading positions in 
       Australia, France, Japan, Portugal, Spain and the
U.K.  This global 
       footprint creates substantial growth opportunities,
and reduces the 
       risks associated with over-reliance on any one
region.  

    -- Broad and diversified product portfolio: The new
company will be well 
       diversified across most therapeutic areas with
approximately 560 
       products.   

    -- Differentiated dosage form expertise: The combined
company will have 
       manufacturing capabilities in several specialized
dosage forms 
       including solid orals, patches, controlled-release
and high potency 
       formulations, antibiotics, sterile liquids,
inhalants and creams. Many 
       of these dosage forms benefit from barriers to
competition and longer 
       product growth cycles.  Additionally, Merck Generics
has a highly 
       successful product sourcing and in-licensing
strategy that has allowed 
       the company to develop critical mass in key
differentiated dosages in 
       attractive markets.

    -- Vertical integration and API supply:  Together,
Mylan and Merck 
       Generics will benefit from significant savings
driven by Matrix's low 
       cost, high quality API capacity and the benefits of
manufacturing high 
       product volumes for multiple markets around the
world. In 2007, Mylan 
       completed its acquisition of a 71.5% stake in
India-based Matrix, the 
       second largest API manufacturer globally, with more
than 165 APIs in 
       the marketplace or under development.

    Transaction Details

    Under terms of the transaction, which have been
unanimously approved by Mylan's Board of Directors, Mylan
will acquire 100% of the shares of the various businesses
comprising Merck Generics for a cash consideration of EUR
4.9 billion (US$6.7 billion). Mylan has secured fully
committed debt financing from Merrill Lynch, Citigroup and
Goldman Sachs.

    The transaction is anticipated to be dilutive to
full-year cash EPS(1) in year one, breakeven in year two,
and significantly accretive thereafter based on
management's internal projections. The company is committed
to reducing its leverage in the near term through the
issuance of US$1.5 billion to US$2.0 billion of equity and
equity-linked securities.  The combined company will
generate substantial free cash flow that will further
enable it to rapidly reduce acquisition-related debt. 
Reflecting its more leveraged capital structure and focus
on growth, Mylan is suspending the dividend on its common
stock.   

    Mylan expects to achieve synergies of approximately
US$250 million by the end of year three.  The majority of
these synergies will result from vertical integration of
Merck's API supply by leveraging the Matrix platform,
aligning capabilities in research and development, and
driving further efficiencies in increased manufacturing
volumes of key products across the globe.  

    Mylan does not anticipate significant reductions in
headcount at Mylan, Matrix or Merck Generics in order to
achieve these synergies.

    The combined company will have a dramatically
accelerated growth profile with long-term compounded net
income growth expected to exceed 30% per annum and
long-term revenue growth in excess of 10%. This growth will
be driven by new opportunities created by the formation of a
truly global platform, through promising growth at Merck
Generics, and by expected de-leveraging of the balance
sheet.

    The transaction remains subject to regulatory review in
relevant jurisdictions and certain other customary closing
conditions, and is expected to close in the second half of
2007.

    Mr. Coury concluded: "We have been very impressed
by the successful business built by the management team and
employees at Merck Generics and by their dedication to
excellence across all areas of their operations.  We look
forward to working together to create greater opportunities
for all employees of Mylan and Merck Generics, as well as to
uniting two cultures built on excellence in regulatory,
R&D, manufacturing and customer service in one of the
world's largest global generic pharmaceutical
companies." 

    Merrill Lynch acted as exclusive financial advisor and
provided a fairness opinion to Mylan in this transaction.
The external legal counsel for Mylan was Cravath, Swaine
& Moore LLP. 

    Conference Call and Webcast Information

    Mylan will host a conference call and webcast for
investors and analysts on Monday, May 14, 2007 at 8:00 a.m.
EDT / 2:00 p.m. CET to discuss the transaction.  To
participate in the conference call, please [phone]
(U.S.) or [phone] (international) fifteen minutes
before start time. The pass code for the live call is
8805204.  A telephonic replay of the call will be available
by dialing [phone] (U.S.) or [phone]
(international).  The replay participant code is 8805204.

    Live audio of the conference call and slide
presentation will be simultaneously broadcast over the
Internet.  The webcast of the conference can be found on
Mylan's Web site, http://www.mylan.com.  The webcast will
be archived and available for replay after the event.

    About Mylan

    Mylan Laboratories Inc. is a leading pharmaceutical
company with three principle subsidiaries, Mylan
Pharmaceuticals Inc., Mylan Technologies Inc. and UDL
Laboratories Inc., and a controlling interest in Matrix
Laboratories Limited, India. Mylan develops, licenses,
manufactures, markets and distributes an extensive line of
generic and proprietary products. For more information
about Mylan, visit http://www.mylan.com.

    About Merck Generics

    Merck Generics offers affordable standard therapies in
nearly all major therapeutic areas through high-quality
drugs containing active ingredients that are no longer
patent protected. The range of products includes a wide
assortment of more than 400 different substances plus
special dosage forms and delivery systems with high patient
benefit.

    Forward Looking Statements

    This press release contains statements that constitute
"forward-looking statements", including with
regard to the expected future business and financial
performance of Mylan Laboratories Inc. ("Mylan"
or the "Company") resulting from and following
the planned acquisition of the generics business of Merck
KGaA, such as the generation of cash flows; anticipated
synergies and efficiencies; anticipated cost savings; the
Company's ability to reduce debt; and expectations for
long-term growth.   These statements are made pursuant to
the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.  Because such statements
inherently involve risks and uncertainties, actual future
results may differ materially from those expressed or
implied by such forward-looking statements.  Factors that
could cause or contribute to such differences include, but
are not limited to: factors relating to satisfaction of the
conditions to the acquisition, including regulatory
approvals; challenges and costs relating to integration of
the two businesses; the effect of any changes in customer
and supplier relationships and customer purchasing
patterns; the impact and effects of legal or regulatory
proceedings, actions or changes; general market perception
of the transaction; the effects of vigorous competition on
commercial acceptance of the companies' products and their
pricing; the potential costs and product introduction
delays that may result from use of legal, regulatory and
legislative strategies by Mylan's competitors;
uncertainties regarding patent, intellectual and other
proprietary property protections; exposure to lawsuits and
contingencies associated with both companies' businesses;
the ability to attract and retain key personnel; prevailing
market conditions; changes in economic and financial
conditions of the Company's business; uncertainties and
matters beyond the control of management; and the other
risks detailed in the periodic filings filed by the Company
with the Securities and Exchange Commission. The Company
undertakes no obligation to update these statements for
revisions or changes after the date of this release.


    For more information, please contact:  

    Patrick Fitzgerald
    Mylan Laboratories
    Tel:   [phone]
    Email: [e-mail]

    Nina Devlin 
    Cindy Leggett-Flynn
    Brunswick Group
    Tel:   [phone]
    Email: [e-mail]

    Alexa von Wietzlow 
    Brunswick Group
    Tel:   [phone]
    Email: [e-mail]