Published: Fri, April 20, 2018
Markets | By Terence Owen

Merck to sell global consumer health business to P&G for $4.2bn

Merck to sell global consumer health business to P&G for $4.2bn

This acquisition enables P&G to expand its successful consumer health care business by adding a fast-growing portfolio of differentiated, physician-supported brands across a broad geographic footprint.

The acquiring price for the Merck's business suggests that the Germany company has descended from the price demands of as much as four billion euros, which as per sources had deterred initial suitors like Nestle, Stada owners Bain and Cinven and Perrigo. Its top brands include Neurobion, Dolo-Neurobion, Femibion, Nasivin, Bion3, Seven Seas and Kytta, along with many others, and these are sold primarily in Europe, Latin America and Asia.

In two years, Merck's $1bn Consumer Health business has grown by 6% and provides a broad range of OTC product remedies to relieve muscle, joint and back pain, colds and headaches as well as products for supporting physical activity and mobility.

Several big drugmakers have been considering selling their consumer divisions, which typically have lower but more stable margins than the prescription pharmaceutical business.

The deal will "complement" brands such as Vicks, Metamucil, Pepto-Bismol, Crest and Oral-B, P&G says in a release announcing the deal.

Morgan Stanley analyst Vincent Meunier said the price still implied a valuation of 4.7 times sales and around 19 times operating profit (EBITDA) for the business, at the high end of recent deals seen in the sector.

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The move allows Merck to focus on its pharmaceuticals unit, as it looks to bolster its pipeline of new drugs amid a wave of key patent expirations. "It is a clear demonstration of our continued commitment to actively shape our portfolio as a leading science and technology company", noted Merck chairman and CEO Stefan Oschmann.

For the full year 2017, net sales of the consumer health business amounted to 911 million euros ($1.1 million). It expects the sale to P&G to close by the fourth quarter.

Merck said the transaction will be executed through the sale of Merck's shares in a number of legal entities as well as various asset sales.

A final deal with P&G on Merck's French consumer health business has yet to be devised out with the labour representatives however, that would not change the overall price decided with P&G.

As part of the transaction, it is contemplated that approximately 3,300 employees, mainly from consumer health, will transition to P&G upon completion of the transaction.

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