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Business News/ Companies / News/  Bayer to buy Merck’s consumer unit for $14.2 billion
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Bayer to buy Merck’s consumer unit for $14.2 billion

The two firms will collaborate on the development and marketing of a class of drugs that includes Bayer's Adempas

The deal is the second large consumer transaction in a month of reshuffling in the pharmaceutical industry as the biggest drugmakers drop units that aren’t leaders in a particular segment. Photo: BloombergPremium
The deal is the second large consumer transaction in a month of reshuffling in the pharmaceutical industry as the biggest drugmakers drop units that aren’t leaders in a particular segment. Photo: Bloomberg

Berlin: Bayer AG agreed to acquire Merck & Co.’s consumer unit for $14.2 billion, solidifying its position near the top of the market for over-the-counter health products.

The two companies also will collaborate on the development and marketing of a class of drugs that includes Bayer’s Adempas, which is approved to treat pulmonary arterial hypertension, Merck and Bayer said in a statement on Tuesday.

The combination of Merck Consumer Care’s complementary portfolio of products and geographic reach with Bayer’s will create a global consumer care business better positioned to serve consumers around the world, Bayer chief executive officer Marijn Dekkers said in the statement.

The deal is the second large consumer transaction in a month of reshuffling in the pharmaceutical industry as the biggest drugmakers drop units that aren’t leaders in a particular segment. Novartis AG and GlaxoSmithKline Plc agreed 22 April to a consumer-health joint venture. Glaxo also sold its oncology business to Novartis, which sold its vaccines line to Glaxo and its animal-health business to Eli Lilly & Co.

Buying the Merck unit adds Claritin allergy medicine and Coppertone sunblock to a Bayer portfolio anchored by the iconic pain pill aspirin. Bayer, based in Leverkusen, Germany, had €3.9 billion ($5.4 billion) in sales of non-prescription medicines last year, accounting for about 9.7% of the drug and chemical conglomerate’s revenue.

Bayer is the third-biggest company in over-the-counter drugs by sales, behind Johnson & Johnson and Glaxo, according to a ranking compiled by Glaxo for the announcement of its deal with Novartis.

Dealmaking days

Consumer health is a unit that Dekkers has sought to strengthen. The executive, known as a dealmaker from his days molding Thermo Fisher Scientific Inc, has said since the beginning of his tenure in 2010 that he wants Bayer near the top of each of its markets.

The Merck unit reported $1.89 billion in sales last year, down 3% from 2012 after the termination of some distribution agreements in China. Merck decided to put that business and its animal-health unit under review last year in order to allocate more capital to new drugs like its immune system-based cancer medicine, CEO Ken Frazier has said.

The segment accounts for about 4% of Merck’s revenue and includes Miralax constipation treatment, Lotrimin athlete’s foot creams and Afrin nasal congestion sprays. Seventy percent of its sales come from the US, Exane analysts estimate.

Bayer won the contest after Reckitt Benckiser Group Plc, a UK company that moved aggressively on recent consumer-health assets, dropped out of the bidding on 30 April.

A tussle between the two companies ended the other way in 2012. Reckitt Benckiser outbid Bayer then to buy Schiff Nutrition International Inc with a $1.4 billion offer that valued the maker of MegaRed Omega-3 capsules at about 28 times earnings before interest, taxes, depreciation and amortization. The UK company has been willing to pay a premium to expand the health unit, its fastest-growing business, which increased revenue 27% last year. BLOOMBERG

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Published: 06 May 2014, 04:10 PM IST
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