Proctor & Gamble buys Merck's consumer health care unit for $4.2B

Javier Stokes
April 20, 2018

Earlier in the day, P&G agreed to buy the consumer health business of Merck KGaA for about 3.4 billion euros ($4.2 billion), giving its vitamin brands such as Seven Seas and greater exposure to Latin American and Asian markets.

The Merck division has been for sale for several months, and the price P&G announced suggests Merck lowered its asking price from almost $5 billion.

This acquisition enables P&G to expand its successful consumer health care business by adding a fast-growing portfolio of differentiated, physician-supported brands across a broad geographic footprint.

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

P&G officials said in a prepared statement this will "compliment" their health brands Vicks, Metamucil, Pepto-Bismol, Crest and Oral-B.

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

Also part of the transaction are two consumer health-managed production facilities in Spittal, Austria and Goa, India.

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Merck shares were up 0.5 percent higher at 0833 GMT, among top gainers in the German blue-chip DAX index, having risen 1.2 percent earlier.

P&G said that the acquisition will replace and improve upon the joint venture of PGT Healthcare and Teva Pharmaceutical Industries which will be scrapped on 1 July 2018, subject to regulatory approvals. The Merck consumer healthcare brands generate almost $1 billion in annual sales and grew 6% in the past two years.

The company said the increase in core earnings was driven by increased net sales partially offset by a reduction in operating margin due to gains on real estate sales in the base period. It expects the sale to P&G to close by the fourth quarter.

Merck said the divestment of its consumer health business did 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. The company has sold off under-performing brands in the past decade, and about 3,300 Merck employees could move to P&G.

But the deal does not yet include Merck's French consumer health business, although P&G has made a binding offer for this.

Merck said the transaction will be executed through the sale of Merck's shares in a number of legal entities as well as various asset sales.

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