Merck on Thursday announced that it has signed an agreement to sell its global consumer health business to Procter & Gamble (P&G) for approximately €3.4 billion ($4.2 billion) in cash.
The transaction, which is expected to close by the end of the fourth quarter 2018, is subject to regulatory approvals and satisfaction of certain other customary closing conditions. 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 its remaining three business sectors.
“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… The attractive price reflects the high asset value and the performance consumer health has delivered,” said Stefan Oschmann, chairman of the executive board and CEO of Merck. David Taylor P&G chairman, president and CEO, said, “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.”
Between 2015 and 2017, Merck’s consumer health net sales grew organically by a combined 6%, outpacing the consumer health market’s growth of approximately 4% over the same period. In 2017, sales of the consumer health business amounted to €911 million.
The transaction will be executed through the sale of Merck’s shares in a number of legal entities as well as various asset sales and comprises the consumer health business across 44 countries, including more than 900 products and two consumer health-managed production sites at Spittal, Austria; and Goa, India. As part of the transaction, approximately 3,300 employees, mainly from consumer health, will transition to P&G, subject to prior works council consultation where required. This includes Merck employees who, through their work, are fully dedicated to consumer health, and employees in share deal entities. The sale of the global consumer health business does not yet comprise the French consumer health business, where P&G has made a binding offer to acquire the shares and assets after consultations with the relevant works council representatives. 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. As part of the transaction, Merck and P&G have agreed a number of manufacturing, supply and service agreements.
In September 2017 Merck announced that it was preparing strategic options for consumer health, including a potential full or partial sale of the business as well as strategic partnerships. J.P. Morgan acted as financial adviser to Merck, and Freshfields Bruckhaus Deringer acted as a legal adviser to Merck.
By Natasha Alperowicz
Source: Chemical Week
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