Daily Management Review

Consumer Health Unit Of German Company Merck To Be Bought By P&G For $4.2 Billion


04/19/2018




Consumer Health Unit Of German Company Merck To Be Bought By P&G For $4.2 Billion
Procter & Gamble Co (P&G) would be able to provide greater exposure to its vitamin brands such as Seven Seas in regions of Latin America and Asia by the deal where it has announced the takeover of Merck KGaA’s consumer health unit for 3.4 billion euros ($4.2 billion).
 
The portfolio of the consumer healthcare products of the company including the brands like Vicks Cold Relief would be expanded, said the maker of Pampers diapers and Gillette razors.
 
Vitamin brands Femibion and Neurobion are included in the Merck unit.
 
Preceding this deal was the deal between GlaxoSmithKline and Novartis where the former agreed to buy out the later in their joint venture for consumer healthcare for $13 billion.
 
GlaxoSmithKline had earlier attempted to purchase Pfizer.
 
Following the dropping off of Reckitt Benckiser out last month and stepping away of Johnson & Johnson in January, it has been a struggle for Pfizer to divest the business for as much as $20 billion.

Despite the fact that the rate of return is lower than pharmaceuticals, customers’ brand loyalty allows for stable sales for prescription-free remedies.
 
But there has ben pressure on profits in this segment in the U.S. and some other western markets because of intense price competition from online sellers such as Amazon, in addition to those posed by cheaper store-brand products.
 
Last year, its health care products that included Oral-B toothbrushes and toothpastes accounted for $7.5 billion in revenues which was just 12 per cent of the group sale of U.S.-based P&G.
 
It had bene reported that companies such as Nestle, Perrigo and Stada owners Bain and Cinven were deterred from expressing initial interest because of the price of 4 billion euros that the German company had fixed for itself and now the purchase price for Merck’s business is suggestive of a climb down by the company form that high price.
 
Yet, the price set the valuation of the company at 4.7 times sales and about 19 times of the operating profit (EBITDA) of the business, said Morgan Stanley analyst Vincent Meunier. These ranges were higher than the most recent deals in the sector done already.
 
“This will help (Merck) focus on its pharma unit and refurbish its pipeline,” he said.
 
Merck said that it fetched a multiple of about 19.5, above recent industry transactions and based on an adjusted “economically transferred” EBITDA of 173 million euros in 2017.
 
Merck would be able to add more flexibility in its business of chemicals, pharmaceuticals and lab equipment as the company would be able to reduce its debt faster with the money form the deal. It has however ruled out any acquisitions that would be worth over 500 million euros at least for the current year.
 
(Source:www.reuters.com)






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