Procter & Gamble has today announced a deal to buy the consumer health business of Merck for about €3.4 billion.
The deal will give P&G vitamin brands such as Seven Seas and greater exposure to Latin American and Asian markets.
Procter & Gamble's stable of brands include Pampers nappies, Gillette razors and Vicks cough and cold products.
It said the acquisition had been agreed and would enable it to expand its portfolio of consumer healthcare products. Merck's unit also includes vitamin brands such as Femibion, Neurobion and Nasivin.
The price for Merck's business suggests that the German company climbed down from price demands of as much as €4 billion, which sources told Reuters had deterred initial suitors such as Nestle.
Analysts said the price still implied a valuation of 4.7 times sales and around 19 times operating profit (EBITDA) for the business, at the high end of recent deals seen in the sector.
P&G also said it would also terminate its consumer care joint venture with Teva Pharmaceutical Industries, PGT Healthcare, on July 1, saying P&G and Teva's strategies were no longer aligned.
Merck said the divestment of its consumer health business did not change its goal of keeping net sales of its established prescription drugs, such as Erbitux against cancer and multiple sclerosis treatment Rebif, organically stable until 2022.
It will issue guidance for 2018 to reflect the sale of the consumer healthcare business when it publishes first-quarter financial results on May 15, it said.
Merck expects the sale to P&G to close by the fourth quarter.
About 3,300 Merck employees, mainly from the consumer health unit, could move to P&G upon completion of the transaction.
As part of the deal, P&G will also buy a majority stake in the German company's Indian consumer health business, Merck Ltd, and subsequently make a mandatory tender offer to minority shareholders.
The deal does not yet include Merck's French consumer health business, for which P&G has made a binding offer, Merck said.
Meanwhile, Procter & Gamble today reported flat quarterly profits on slightly higher sales, pointing to tough pricing competition in some key product lines.
The US consumer products giant said net income for the quarter ending March 31 was $2.5 billion, essentially unchanged from the same time last year.
Revenues rose 4% to $16.3 billion.
P&G said premium beauty products like Olay Skin Care had enjoyed strong sales growth, while a heavy cough/cold season boosted sales in health care, which includes the Vicks line of cough drops.
But the company reported another drop in grooming sales amid intensifying competition that has pressured P&G's Gillette line into price cuts. P&G also cited tough competitive activity in its baby care business.
"We have large businesses in several difficult markets," said chief executive David Taylor.
"The ecosystems in which we operate around the world are being disrupted and transformed. We will change at an even faster rate - winning through superiority, cost and cash productivity and a strengthened organszation and culture," he added.
