Procter & Gamble Co (P&G) is to acquire the consumer health business of Merck KGaA for about 3.4 billion euros (US$4.21 billion), giving it vitamin brands such as Seven Seas, and greater exposure to Latin American and Asian markets.
P&G, whose stable of brands include Pampers diapers, Gillette razors and Vicks cough and cold products, yesterday said that the acquisition had been agreed upon and would enable it to expand its portfolio of consumer healthcare products.
Merck’s unit also includes vitamin brands such as Femibion, Neurobion and Nasivin.
The purchase price for Merck’s business suggests that the German company climbed down from price demands of as much as 4 billion euros, which sources said deterred initial suitors such as Nestle SA, Perrigo Co and Stada owners Bain Capital Private Equity LP and Cinven Partners LLP.
The price still implied a valuation of 4.7 times sales and about 19 times operating profit for the business, at the high end of recent deals seen in the sector, Morgan Stanley analyst Vincent Meunier said.
“This will help [Merck] focus on its pharma unit and refurbish its pipeline,” he said.
P&G said it would also terminate its consumer care joint venture with Teva Pharmaceutical Industries Ltd, PGT Healthcare LLP, on July 1, because their strategies are no longer aligned.
Merck said the divestment of its consumer health business does not change its goal of keeping net sales of its established prescription drugs, such as Erbitux against cancer and multiple sclerosis treatment Rebif, organically stable until 2022.
It would issue guidance for this year to reflect the sale of the consumer healthcare business when it publishes first-quarter financial results on May 15, it said in presentation slides.
It expects the sale to P&G to close by the fourth quarter, Merck said.
About 3,300 Merck employees, mainly from the consumer health unit, could move to P&G upon completion of the transaction.
As part of the deal, P&G would buy a majority stake in the German company’s Indian consumer health business, Merck Ltd, and subsequently make a mandatory tender offer to minority shareholders.
The deal does not yet include Merck’s French consumer health business, for which P&G has made a binding offer, Merck said.
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