P&G to acquire Merck India business for Rs1,300 crore

New Delhi: Procter & Gamble Co. will buy a majority stake in Merck Ltd, the Indian publicly traded unit of the German drug maker, for Rs1,289.88 crore, as part of a global transaction to acquire Merck KGaA’s international consumer health business for $4.2 billion.

P&G will acquire a 51.8% stake in Merck Ltd, a move that will require the American consumer goods company to make a mandatory offer to buy at least 26% stake from public shareholders.

The acquisition will enable P&G to expand its consumer healthcare business by adding a portfolio of physician-supported brands, complementing its own brands such as Vicks, Metamucil, Pepto-Bismol, Crest and Oral-B.

In India, Merck’s consumer health business is one of the largest in supplying vitamins, minerals and supplements, with products such as Neurobion, Polybion and Evion.

“We like the steady, broad-based growth of the OTC (over the counter) healthcare market and are pleased to add the consumer health portfolio and people of Merck KGaA, Darmstadt, Germany, to the P&G family,” David Taylor, chairman and chief executive officer of P&G said in a statement.

The German drugmaker hired JP Morgan in September to sell the over-the-counter vitamins and food supplements business to help finance research into higher-margin prescription drugs. Merck's consumer health business operates in 44 countries, with more than 900 products.

“The divestment of the consumer health business is an important step in Merck’s strategic focus on innovation driven businesses within healthcare, life science and performance materials,” Merck chairman and CEO Stefan Oschmann said in a statement. 

“Merck intends to use the net proceeds from the divestiture primarily to accelerate deleveraging. At the same time, it will allow Merck to increase flexibility to strengthen all three business sectors,” Merck said in a statement. The transaction is expected to close by the end of this year, Merck said.

Merck said between 2015 and 2017, the consumer health business’s net sales grew 6%, outpacing the consumer health market’s growth of approximately 4% growth over the same period. For the full year 2017, net sales of the unit was $1.12 billion.

“Consumer Health is a strong business that deserves the best possible opportunities for its future development. With P&G we have found a strong, highly recognized player who has the necessary scale to successfully drive the business going forward,” added the CEO.

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. 

For the Indian business, it has been agreed that P&G will acquire Merck’s majority shareholding in Merck Ltd (India), a publicly traded company, and subsequently make a mandatory tender offer to minority shareholders.

“We like the steady, broad-based growth of the OTC healthcare market and are pleased to add Merck’s Consumer Health portfolio and people to the P&G family,”said Taylor. 

The sale of the global consumer health business, however, does not yet comprise its French consumer health business, where P&G has made a binding offer to acquire the shares and assets upon Merck having informed and consulted with the relevant works council representatives. 

As part of the overall transaction, approximately 3,300 employees, mainly from consumer health, will move to P&G upon completion of the transaction.