wnol.info May 23 2018

Proctor & Gamble buys Merck's consumer health care unit for $4.2B

May 23 2018, 01:23 | Alonzo Simpson

P&G Nears Deal to Acquire Merck KGaA's Consumer-Health Unit

P&G to acquire consumer health unit of Germany's Merck for about $4.21

The maker of Pampers diapers and Gillette razors said the deal would help it expand its portfolio of consumer healthcare products which includes Vicks cold relief. "The Consumer Health business of Merck ... brings a strong set of brands, products and capabilities, and provides an attractive and complementary footprint to further fuel growth as we continue to grow our existing leading brands". The consumer health market has witnessed action recently with Novartis divesting part of its holdings for $13 billion to GlaxoSmithKline, amounting to 3.6 times its revenue.

GSK had been left as sole bidder for the Pfizer unit, valued at around $15-20 billion after Reckitt Benckiser chose to pull out.

But intense price competition online, mainly from Amazon, as well as cheaper store-brand products have weighed on profits in the US and other Western markets.

The purchase price for Merck's business suggests that the German company climbed down from price demands of as much as €4 billion, which sources told Reuters had deterred initial suitors such as Nestlé, Perrigo and Stada owners Bain and Cinven.

The deal values Merck's business at 4.2 times annual sales - a fair price, according to Aitken.

GSK had decided against buying Pfizer consumer health unit, which was also up for sale since last autumn.

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Merck shares were up 0.5 percent higher at 0833 GMT, among top gainers in the German blue-chip DAX index, having risen 1.2 percent earlier.

The open offer document said: "The acquirer (Procter & Gamble Overseas India B.V and The Procter & Gamble Company) has entered into a sale and purchase agreement...wherein it is proposed that the acquirer shall purchase from Emedia Export Company MBH, Merck Internationale Beteiligungen GmbH and Chemitra GmbH 8,599,224 equity shares...which constitutes 51.80 per cent of the voting share capital".

The transaction is expected to close by the year end.

Teva said the terms of the agreement to terminate the JV with P&G would not be disclosed and that the dissolution was amicable.

The company has clearly chose to quit consumer health while it is ahead - the unit's net sales grew organically by 6% between 2015 and 2017, outpacing the consumer health market's growth of approximately 4% over the same period.

The sale of the global consumer health business, however, does not yet comprise its French consumer health business, where P&G has made a binding offer to acquire the shares and assets upon Merck having informed and consulted with the relevant works council representatives.

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