P&G buys Merck KGaA's consumer health unit for $4.2bn

Merck KGaA is to sell its consumer health business to Procter and Gamble for $4.2 billion, continuing the trend for big pharma companies to rethink their investment in over-the-counter products.

German Merck has been considering a sale of the business since late last year, and had according to Reuters had attracted suitors such as Nestle, Perrigo, and Stada owners Bain and Cinven.

But these had been reportedly put off by price demands of as much as 4 billion euros – nearly $5 billion – and the purchase price for Merck’s business suggests it had to offer a discount to get the deal done.

Products marketed by German Merck’s consumer division include Seven Seas cod liver oil and Bion3 supplements.

The company has clearly decided to quit consumer health while it is ahead – the unit’s net sales grew organically by 6% between 2015 and 2017, outpacing the consumer health market’s growth of approximately 4% over the same period.

For the full year 2017, net sales of the consumer health business amounted to 911 million euros ($1.1 million).

P&G will also buy a majority stake in Merck KGaA’s consumer health business in India, Merck Ltd, and make a mandatory tender offer to minority shareholders.

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

Around 3,300 Merck employees from its consumer health unit could move to P&G upon completion of the deal.

Merck KGaA is not the only big pharma that wants to change its consumer health strategy – at the end of March, GlaxoSmithKline paid $13 billion to Novartis to gain full control of an OTC joint venture.

GSK had decided against buying Pfizer consumer health unit, which was also up for sale since last autumn.

GSK had been left as sole bidder for the Pfizer unit, valued at around $15-20 billion after Reckitt Benckiser decided to pull out.

Pfizer is reviewing its options for the consumer health unit after the sale fizzled out.