P&G to Buy German Merck's Consumer Unit for $4.2 Billion

P&G to Buy German Merck's Consumer Unit for $4.2 Billion

P&G to Buy German Merck's Consumer Unit for $4.2 Billion

"The deal gives the maker of Crest toothpaste a stable of products with sales growth of 6% in the past two years, double the pace of traditional consumer goods such as razors, diapers and tissues", write K Oanh Ha and Jeff Sutherland for Bloomberg.

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. The business sells brands like Seven Seas cod liver oil and Femibion supplements for pregnant women.

Pfizer has struggled to divest the business for as much as $20 billion, after Reckitt Benckiser dropped out last month and Johnson & Johnson stepped away in January.

Prescription-free remedies offer stable sales due to customers' brand loyalty, albeit at lower margins than pharmaceuticals.

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USA -based P&G derived 12 percent of group sales, or $7.5 billion, from health care products a year ago, including Oral-B toothbrushes and toothpastes.

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

Shares in Merck rose 2.9% to the top of the German blue-chip DAX index in pre-market trade at brokerage Lang & Schwarz.

The acquisition also improves upon the highly successful PGT Healthcare joint venture P&G had with Teva Pharmaceutical Industries, which will be terminated July 1, 2018, pending regulatory approvals.A recent review found that the two companies priorities and strategies were no longer aligned. In a press release, P&G said the Merck acquisition will strengthen P&G's global presence in health areas the company wasn't as strong in.

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"P&G's global scale and strategic interest in the health and well-being of consumers provide an excellent basis for accelerating growth, leveraging our teams' capabilities and expanding the Consumer Health business profitably", commented Belén Garijo, Member of the Executive Board of Merck.

"In other news, P&G reported better-than-expected quarterly revenue on Thursday, boosted by strong sales in its beauty, and fabric and home-care businesses", according to a Reuters report on CNBC.

JP Morgan acted as financial adviser to Merck on the transaction, and Fresh fields Bruckhaus Deringer was legal adviser.

As part of the agreement, P&G would purchase a majority stake in the German firm's Indian consumer health business-Merck Ltd, and would then gradually make a mandatory tender offer to the minority stakeholders.

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