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BAYER AG

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Germany's Merck hires JP Morgan to sell consumer health

09/08/2017 | 04:33pm EDT

FRANKFURT/LONDON (Reuters) - Germany's Merck KGaA (>> Merck KGaA) has hired JP Morgan (>> JP Morgan Chase & Company) to sell its consumer health business, which includes brands such as Seven Seas vitamins and could be worth around $4.5 billion (3.41 billion pounds).

FRANKFURT/LONDON (Reuters) - Germany's Merck KGaA (>> Merck KGaA) has hired JP Morgan (>> JP Morgan Chase & Company) to sell its consumer health business, which includes brands such as Seven Seas vitamins and could be worth around $4.5 billion (3.41 billion pounds).

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 (>> Nestlé), three sources familiar with the matter told Reuters on Friday.

But while preliminary talks were held over the summer with Nestle, which favoured 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 ageing 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 (>> Procter & Gamble Company) along with Johnson & Johnson (>> Johnson & Johnson), GSK (>> GlaxoSmithKline), Takeda (>> Takeda Pharmaceutical Co Ltd) and Abbott (>> Abbott Laboratories) 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 (>> 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 (>> Bayer) has been largely ruled out because it is busy trying to get approval for its planned purchase of Monsanto (>> Monsanto) while dealing with weakness at its own consumer care business.

Sanofi (>> Sanofi) is also seen as unlikely to bid because it is absorbed in folding Boehringer Ingelheim's consumer care business into its organisation after an asset swap.

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

By Patricia Weiss, Ludwig Burger and Pamela Barbaglia


ę Reuters 2017
Stocks mentioned in the article
ChangeLast1st jan.
ABBOTT LABORATORIES -1.06% 119.52 Delayed Quote.10.33%
BAYER AG 0.33% 51.37 Delayed Quote.6.32%
GENERAL MILLS, INC. -0.13% 59.32 Delayed Quote.1.02%
GLAXOSMITHKLINE PLC -1.34% 1397 Delayed Quote.5.51%
JOHNSON & JOHNSON 0.05% 171.87 Delayed Quote.9.16%
JPMORGAN CHASE & CO. 0.67% 151.65 Delayed Quote.18.55%
MERCK & CO., INC. -0.39% 77.24 Delayed Quote.-5.21%
MERCK KGAA -1.21% 171.85 Delayed Quote.23.94%
MONSANTO 0.00%End-of-day quote.0.00%
NESTLÉ S.A. -1.12% 114.32 Delayed Quote.10.90%
PFIZER, INC. 0.31% 41.81 Delayed Quote.13.23%
PROCTER & GAMBLE COMPANY 0.35% 140.28 Delayed Quote.0.47%
RECKITT BENCKISER GROUP PLC -0.62% 6225 Delayed Quote.-4.25%
SANOFI -0.56% 87.58 Real-time Quote.11.91%
SWISS RE LTD 0.58% 83.74 Delayed Quote.-0.10%
TAKEDA PHARMACEUTICAL COMPANY LIMITED -0.27% 3700 End-of-day quote.-1.46%
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Financials
Sales 2021 41 461 M 48 936 M 48 936 M
Net income 2021 3 600 M 4 250 M 4 250 M
Net Debt 2021 38 636 M 45 602 M 45 602 M
P/E ratio 2021 15,0x
Yield 2021 3,95%
Capitalization 50 467 M 59 604 M 59 566 M
EV / Sales 2021 2,15x
EV / Sales 2022 2,03x
Nbr of Employees 99 329
Free-Float 100,0%
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Werner Baumann Chairman-Management Board
Wolfgang U. Nickl Chief Financial Officer
Norbert Winkeljohann Chairman-Supervisory Board
Bijoy Sagar Chief Information Technology Officer
Paul Achleitner Member-Supervisory Board
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