Bayer wins Merck & Co’s $14 billion consumer unit auction
Germany’s Bayer AG has trumped rival bidders for Merck & Co Incis customer care company in a $14.2 billion offer, contributing to a chain of key cross-line deals within the healthcare industry.
“This acquisition represents a significant milestone on our route towards international management within the appealing low-prescription medications company,” Bayer’s leader, Marijn Dekkers, stated in a statement on Tuesday.
Merck, that will be promoting low-prescription manufacturers like the MiraLAX herbal and Afrin cold treatment, said it needs after-tax profits of between $8 billion and $9 billion in the purchase, that will be likely to shut within the second half 2014.
The deal, the biggest within the German health business since Bayer purchased competitor Schering for 17 billion pounds ($24 billion) in 2006, can make Bayer the planet’s second-largest consumer health organization, because it tries to create greater utilization of its distribution system and sales team.
“we could get these items and market them more vigorously than Merck continues to be able to do this much,” Dekkers said in a conference call with experts.
Bayer, the creator of discomfort and producer of Canesten antifungal products and Bepanthen skincare products, has repeatedly stated it really wants to consider the top position within the ranks.
Drug manufacturers have started on the significant reshuffling of the business portfolios. Novartis and GlaxoSmithKline (GSK) last month decided to industry significantly more than $20 billion worth of resources, while AstraZeneca is overcoming a $106 billion takeover approach from Pfizer.
Meanwhile businesses including Franceis Abbott, Merck & Co and Sanofi are considering selling off adult medicines which have lost patent protection.
OTC medicines devices take less prices than prescription medications companies but several drug majors respect them as beautiful matches because of the steady flow of money they could produce.
They certainly will be less subjected to the increased loss of patent protection where customers remain faithful to some brand-even when inexpensive copies become available and akso need less paying for growth and research.
But Reckitt Benckiser Group, among the remaining competitors in Merck’s market, said on April 30 it had been no further in-active discussions to purchase the Merck company, making Bayer in pole position.
Bayer also edged out other rival bidders, including Sanofi, Boehringer Ingelheim, Novartis and Procter & Gamble Co, people acquainted with the problem have said.
J & J instructions about 4 percent of the customer health industry – worth almost $200 billion in the retail level.
Merck & Co has around 1 percent with manufacturers including Claritin allergy medicine, Coppertone sunscreen and Dr Scholl foot care.
The fragmented OTC business is combining rapidly. GSK and Novartis will form a partnership in consumer health included in their contract last month.
That offer is placed to raise the mixed team, with $9.5 billion in revenue, towards the the top of international consumer health position, overpowering Johnson & Johnson and Bayer.
But Bayer said the Merck package can put it back about the next step, with $7.4 billion in combined income.
J&J’s customer device has $14.7 billion but industry experts exclude a lot of its products, for example Listerine mouthwash, from their evaluation of the OTC market.
With Bayer spending 6.5 times 2013 income and 21 times earnings before interest, fees, decline and amortization (EBITDA), experts at Deutsche Bank said the high cost may appear “eye-watering” at first sight.
“the offer works both strategically and economically, and produces value (although to some moderate level),” the experts said, incorporating it reduces volatility within the Bayer company and offers a predictable income.
Bayeris increased customer care product may take into account about 13 percent of team income, up from ten percent today.
Bayer’s shares closed 0.9 percent lower at 99.07 pounds, as the STOXX Europe 600 healthcare index slipped 0.4 percent.
Reuters initially reported last month that Reckitt and Bayer had
emerged as frontrunners in the market with each initially providing approximately $13.5 billion.
Additionally, Bayer decided to market to Merck some privileges to its Adempas medication against high blood pressure within other experimental cardiovascular medications and the lung, saying it required a marketing partner.
Included in that coalition, Merck can pay as much as $2.1 billion, including $1.1 billion in milestone payments contingent on development results.
Bayer said it plans to fund the OTC purchase having a bridge loan service supplied by Bank of Mizuho, BNP Paribas and America Merrill Lynch, which is syndicated to some larger number of banks.
It included no-asset sales were required to protect its credit score of “A-“.