Merck KGaA to sell consumer health unit to P&G for 3.4 billion euros

Merck KGaA announced Thursday an agreement to sell its global consumer health business to Procter & Gamble for approximately 3.4 billion euros ($4.2 billion) in cash, with the transaction set to close by the end of the year. Merck CEO Stefan Oschmann said the divestment "is an important step in Merck’s strategic focus on innovation driven businesses within healthcare [and] life science."

Oschmann added "the attractive price reflects the high asset value and the performance consumer health has delivered." Between 2015 and 2017, sales in Merck's consumer health unit grew organically by 6 percent, with revenue last year of 911 million euros ($1.1 billion). Merck noted that proceeds from the sale will allow it strengthen all three of its business sectors.

In September last year, the company disclosed that it was preparing strategic options for the business, including a potential full or partial sale, as well as strategic partnerships. Earlier this year, sources suggested that Nestlé was the frontrunner to acquire Merck's consumer health business after other potential buyers, including Perrigo and private-equity firms Bain Capital and Cinven, withdrew from the bidding process.

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The business that Merck will divest includes more than 900 products across 44 countries, with approximately 3300 employees, mainly from consumer health, transitioning to P&G upon completion of the transaction.

Commenting on the deal, Morgan Stanley analyst Vincent Meunier said "this will help (Merck) focus on its pharma unit and refurbish its pipeline," adding that the price was at the high end of deals in the sector. Last month, GlaxoSmithKline agreed to buy Novartis' 36.5-percent stake in the companies' consumer healthcare joint venture (JV) for $13 billion, giving the UK drugmaker full control of the business. Pfizer has also been weighing options for its consumer healthcare business, although both GlaxoSmithKline and Reckitt Benckiser recently ended their interest in the unit.

Meanwhile, P&G noted that the acquisition of Merck's business will replace a 2011 JV with Teva, which will be terminated on July 1. P&G explained that following a recent review, the companies concluded that their priorities and strategies were no longer aligned and agreed to terms where it would be mutually beneficial to end the partnership.

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