Proctor & Gamble acquires Merck's consumer health arm for €3.4bn

A cyclist rides past a logo of drugs and chemicals group Merck KGaA in Darmstadt Thomson Reuters

The €3.4bn ($4.2bn) price tag agreed for the unit is at the lower end of analyst expectations and gives P&G access to big-selling brands such as Neurobion, a vitamin B supplement, and the Nasivin nasal decongestant range. Merck put the consumer health unit on the market a year ago in order to focus its efforts on prescription drugs.

The deal enables the maker of Pepto-Bismol and Crest toothpaste to expand its consumer health care business by adding vitamins and pain medication while extending its geographic reach. Novartis sold its interest in a consumer joint venture to partner GlaxoSmithKline Plc, gaining cash to invest in innovative drugs.

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

The offer price suggests that Merck climbed down from price demands of as much as €4 billion, which sources have told Reuters deterred initial suitors such as Nestle, Perrigo and Stada owners Bain and Cinven.

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"This will help (Merck) focus on its pharma unit and refurbish its pipeline", he said.

P&G's share price has fallen 13% in the past year.

The acquisition also improves upon the highly successful PGT Healthcare joint venture P&G had with Teva Pharmaceutical Industries, which will be terminated July 1, 2018, pending regulatory approvals.A recent review found that the two companies priorities and strategies were no longer aligned.

Merck had earned €911m from the consumer health business in 2017.

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It expects the sale to P&G to close by the fourth quarter.

JP Morgan acted as financial adviser to Merck on the transaction, and Freshfields Bruckhaus Deringer was legal adviser.

"For the Indian business, it has been agreed that P&G will acquire Merck's majority shareholding in Merck Ltd (India), a publicly traded company, and subsequently make a mandatory tender offer to minority shareholders", it said. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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