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Germany's Merck hires JP Morgan to sell consumer health
September 11, 2017 / 8:01 AM / 9 days ago

Germany's Merck hires JP Morgan to sell consumer health

A cyclist drives past a logo of German drugs and chemicals group Merck KGaA in Darmstadt, Germany January 28, 2016. REUTERS/Ralph Orlowski/Files

FRANKFURT/LONDON (Reuters) - Germany’s Merck KGaA has hired JP Morgan to sell its consumer health business, which includes brands such as Seven Seas vitamins and could be worth around $4.5 billion.

The family-controlled drugmaker said on Tuesday it was considering selling the business, whose sales of over-the-counter medicines and vitamin supplements are about $1 billion a year, to help fund research into higher-margin prescription drugs.

It has already sounded out prospective buyers including Swiss food giant Nestle, three sources familiar with the matter told Reuters on Friday.

But while preliminary talks were held over the summer with Nestle, which favored a joint venture deal, no agreement was reached, two of the sources added.

The global market for consumer health products is worth an estimated $233 billion in sales this year, according to Euromonitor International, which ranks Merck’s business in the sector as the 32nd biggest, with a 0.4 percent share.

One source said Merck was eyeing a price of 5 billion euros, while others said that 4 billion euros would be too ambitious because the business lacks global reach. Analysts at Bernstein have put a price tag of 3.7-5.6 billion euros on the business.

Consumer health is very fragmented and has proved fertile ground for deals in recent years, as aging populations and health-conscious consumers drive demand. Nestle, which wants to become a “nutrition, health and wellness company,” recently said it would pursue opportunities to expand in the sector.

Merck, which confirmed JP Morgan’s role but declined to comment on other aspects of the process, prefers an outright sale of the business, which owns brands such as Bion nutritional supplements and decongestant Nasivin, the sources said.

But Nestle, which also declined to comment, could yet decide it wants to buy the whole business, they said.

GUGGENHEIM ON BOARD

Two people familiar with the situation said Guggenheim Partners was also helping in the sales process. Merck and the boutique bank both declined to comment on its involvement.

The German group said earlier this week it would give itself until early next year to make a decision on what to do with the business.

Any delay might suit potential bidders such as Reckitt Benckiser, one of the sector’s biggest consolidators, which is digesting the $17 billion purchase of Mead Johnson.

Consumer company Procter & Gamble along with Johnson & Johnson, GSK, Takeda and Abbott are all seen as other possible suitors.

But Procter & Gamble is fighting off activist shareholder Trian, while Takeda has just bought Ariad.

And U.S. drugmaker Pfizer is not interested in bulking up in consumer health, a source familiar with the company’s strategy said. The company declined to comment.

Bayer has been largely ruled out because it is busy trying to get approval for its planned purchase of Monsanto while dealing with weakness at its own consumer care business.

Sanofi is also seen as unlikely to bid because it is absorbed in folding Boehringer Ingelheim’s consumer care business into its organization after an asset swap.

($1 = 0.8310 euros)

Additional reporting by Martinne Geller and Arno Schuetze; editing by Alexander Smith

Our Standards:The Thomson Reuters Trust Principles.
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