USAThe drums of consolidation in Big Pharma were beating loudly after Pfizer bid for Wyeth in January. And as Merck and Schering-Plough were already teamed up on key drugs, the deal they announced this morning was hardly a shock. Though analysts said the pact has lots of logic to sell it — the companies are practically neighbors in New Jersey — the market is playing defense, so any excitement about Monday merger mania was quickly quashed as the economic Thorazine kicked in.

Long the preferred defensive play in a downturn, Big Pharma has been suffering along with the rest of the market as investors unwind the bull-market era and dump stocks for treasuries in the face of the biggest surge of new government debt issuance in living memory. Plus, consider that just last week the Obama administration was marshaling the president’s executive might to make good on a campaign pledge to tackle soaring health-care costs. Considering the environment, the strength of logic might not be enough to cast the Merck/Schering-Plough deal as anything other than a defensive necessity.

Shareholders are acting defensively as well. Merck shares were retreating in premarket trade, indicating a lack of confidence that the synergies of the merger will overcome what ails Wall Street.
Deals of the Day:

* Iceland’s financial watchdog said it had taken over investment bank Straumur Burdaras <STRB.IC>, the last major Icelandic bank left standing after the country’s financial collapse in October.

* Four global spirits makers, including Diageo, have shown interest in acquiring stake in India’s United Spirits, the world’s third-largest spirits maker, the Times of India said on Monday, quoting agencies.