Serono (NYSE:SRA) has never been one of my favorite biopharmaceutical companies. The two drugs that account for more than 80% of company sales -- Rebif for multiple sclerosis, and infertility treatment Gonal-f -- are relatively stale products facing multiple competitive threats.

Last fall, it seems that Serono's management reached this same conclusion and decided to put the company up for sale. Unfortunately, Serono couldn't find anyone willing to pay its asking price, so the company pulled down the for-sale signs this past April.

When Serono took itself off the auction block, it also announced plans to shift from acquiree to acquirer and find companies or drugs to fill its bare pipeline. You can forget about that, however, after this morning's surprise announcement that Serono has sold itself to German pharmaceutical company Merck KGaA (not to be confused with the American Merck (NYSE:MRK) pharmaceutical company).

When the deal closes, Serono shareholders will get approximately a 20% premium for their shares, compared to yesterday's closing price. Since the stock is nearly 15% below its annual highs, shareholders clearly aren't making out like bandits with this acquisition. Regardless, the deal will go ahead as planned, since the majority of Serono's stock is held by a single family that has already approved the buyout.

This deal continues the trend of consolidation between European pharmaceutical companies, starting with Sanofi and Aventis's union in 2004 to form Sanofi-Aventis (NYSE:SNY) and continuing most recently with German drugmaker Bayer AG's (NYSE:BAY) acquisition of Schering AG two months ago.

I'm not sure what sort of value Merck will be able to leverage from this deal. It does make sense to combine Serono with another European company, since Serono is based in Switzerland. When the deal closes in early 2007, and Merck acquires all the shares of Serono, it will have cost the company nearly $18 billion. Compared to Serono's $2.4 billion in sales last year (up 7.4% from 2004) this deal looks expensive.

For Merck, there must be some synergies in research and economies of scale in production and sales that the combined companies can leverage. Otherwise, the deal doesn't look particularly great. For Serono shareholders, well, at least the fate of their company is no longer in limbo.

The American version of Merck was a former Motley Fool Income Investor pick. To discover which top dividend payers still make the cut, try the premium newsletter service free for 30 days.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .