Published: Sun, April 22, 2018
Money | By Wilma Wheeler

P&G Takes on Merck's Consumer Health Division for $4.2B

P&G Takes on Merck's Consumer Health Division for $4.2B

The Procter & Gamble Company (P&G) has agreed to acquire consumer health business of Merck for approximately US$4.2 billion.

The deal gives the maker of Crest toothpaste a stable of products with sales growth of 6 percent in the past two years, double the pace of traditional consumer goods such as razors, diapers and tissues.

Merck said previous year that is was mulling over the future of its consumer health division, and that a sale would help it execute its science and technology focused strategy.

The deal represents "a step in the right direction for P&G", said Deborah Aitken, an analyst with Bloomberg Intelligence. In premarket trading, shares slipped 2.8 per cent to $76. "These brands provide great solutions in relieving muscle, joint and back pain, colds and headaches, as well as supporting physical activity and mobility, many of which are treatment areas not now addressed in P&G's portfolio".

P&G CEO David Taylor said that the company "liked the steady, broad-based growth" of the over-the-counter health care market and that the acquisition would bolster the company's geographic reach and product portfolio. "P&G believes the combined brands, countries and capabilities are highly complementary and that together we can continue to lead industry growth in the places and segments where we compete", the spokesperson added.According to details submitted to the exchange, P&G will buy 8,599,224 equity shares of Rs 10 each, which constitutes 51.8% of its equity capital, from Emedia Export Company MBH, Merck Internationale Beteiligungen GmbH and Chemitra GmbH.

Several drugmakers have been considering selling their consumer divisions. 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. It also provides P&G with strong Health Care commercial and supply capabilities, deep technical mastery and proven consumer Health Care leadership. Pfizer is reviewing its options after the sale of its consumer-health business fizzled in March, with potential suitors such as Reckitt bowing out. Germany's Merck is different from U.S-based Merck & Company, Inc. JPMorgan Chase & Co. acted as its financial adviser and Freshfields Bruckhaus Deringer acted as a legal adviser.

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