Roche, Genentech in talks on $47 billion deal

"I think it should be at least $12 billion to $15 billion higher," he said. "I don't think investors will be happy until the price comes up to the high-$20's or $30 (per share)."

Schering-Plough shares rose 14.2 percent to $20.13, still below their 52-week high of $22.78. Merck closed down 7.7 percent at $20.99, after hitting a 14-year low of $20.10.

Merck's 4.75 percent notes due in 2015 traded weaker, with spreads widening to 149 basis points over Treasuries, yielding 4.4 percent. On March 4, in their last notable trade, the spread was 124 basis points with a yield of 4.2 percent, according MarketAxess data.

ARTHRITIS DRUG RIGHTS IN QUESTION

A big question is whether Merck will inherit Schering-Plough's overseas rights to nearly $2 billion-a-year Remicade and newer arthritis drug golimumab.

Analysts expressed surprise at Merck's confidence it will not have to hand back the arthritis drug rights to Johnson & Johnson under a change of control clause.

Merck, which structured its takeover as a reverse merger that analysts said may give it some leverage to protect the arthritis drugs, said it had not discussed the matter with J&J and that the high-stakes issue would be settled by binding arbitration if J&J throws up a roadblock.

"It is theoretically possible that J&J comes in and bids for Schering-Plough, because the fit between Schering-Plough and J&J would be a good one," said Sanford Bernstein analyst Tim Anderson.

J&J officials declined to comment.

The deal is composed of $9.8 billion in cash, $8.5 billion in financing provided by JPMorgan Chase & Co and $22.8 billion in Merck stock.

Merck Chief Executive Richard Clark, who investors initially considered a caretaker CEO when he took the helm in 2005, will lead the combined company, with Merck shareholders owning a 68 percent stake.

Schering-Plough CEO Fred Hassan, who turned around Pharmacia Corp before selling it to Pfizer Inc, said his plans after the Schering-Plough deal is completed are unclear.

Merck, which vowed to maintain its dividend, expects the deal to close in the fourth quarter and add modestly to operating earnings in the first full year following completion and "significantly" after that.

The combined 2008 revenue of the two companies totaled $47 billion and Merck believes it will maintain its current credit ratings.

Bernstein's Anderson cautioned that such a big company, with combined revenues close to Pfizer's, could have a much harder time delivering earnings growth.

J.P. Morgan acted as financial adviser and Fried, Frank, Harris, Shriver & Jacobson LLP acted as legal adviser to Merck. Goldman, Sachs and Morgan Stanley acted as financial advisers and Wachtell, Lipton, Rosen & Katz acted as legal adviser to Schering-Plough.

(Reporting by Edward Tobin, Ransdell Pierson and Walden Siew in New York and Ben Hirschler in London, Sam Cage in Zurich; Editing by Lisa Von Ahn, Andre Grenon, Richard Chang)