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Merck to sell consumer health business to P&G for $4.2 billion

Merck to sell consumer health business to P&G for $4.2 billion

The Cincinnati company also said it is paying $4.2 billion for Merck KGaA's consumer health unit, adding products and geographic reach.

German Merck has been considering a sale of the business since late a year ago, and had according to Reuters had attracted suitors such as Nestle, Perrigo, and Stada owners Bain and Cinven.

Pfizer has struggled to divest the business for as much as $20 billion, after Reckitt Benckiser dropped out last month and Johnson & Johnson stepped away in January.

But intense price competition online, mainly from Amazon, as well as cheaper store-brand products have weighed on profits in the USA and other Western markets.

It also provides P&G with strong health care commercial and supply capabilities, deep technical mastery and proven consumer health care leadership that will complement P&G's existing consumer Health Care capabilities, with brands such as Vicks, Metamucil, Pepto-Bismol, Crest and Oral-B.

Merck shares were up 0.5 percent higher at 0833 GMT, among top gainers in the German blue-chip DAX index, having risen 1.2 percent earlier.

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The company said the increase in core earnings was driven by increased net sales partially offset by a reduction in operating margin due to gains on real estate sales in the base period.

This acquisition replaces and improves upon the highly successful PGT Healthcare joint venture which P&G had with Teva Pharmaceutical Industries. The Merck consumer healthcare brands generate almost $1 billion in annual sales and grew 6% in the past two years. As Sonia Legg reports, the deal was announced shortly before P&G reported better than expected quarterly results.

JP Morgan acted as financial adviser to Merck on the transaction, and Fresh fields Bruckhaus Deringer was legal adviser.

"The Merck KGaA business manufactures over-the-counter products and generates around $1 billion in annual sales from a portfolio of 10 core brands that are sold in more than 40 markets but not the U.S. Its products include vitamins, Femibion supplements for women, Seven Seas cod liver oil and Nasivin nasal decongestant", they continue.

As part of the agreement, P&G would purchase a majority stake in the German firm's Indian consumer health business-Merck Ltd, and would then gradually make a mandatory tender offer to the minority stakeholders.

About 3,300 Merck employees, mainly from the consumer health unit, could move to P&G upon completion of the transaction.