P&G to acquire Merck and move on from PGT

P&G to acquire Merck and move on from PGT
Procter & Gamble will gain a portfolio of consumer healthcare brands including Neurobion and Seven Seas

19 April 2018 - Deborah Wilkes

Procter & Gamble is acquiring Merck's Consumer Health business for EUR3.4 billion (USD4.2 billion) and will terminate its PGT Healthcare joint venture with Teva Pharmaceutical on 1 July 2018.

David Taylor, Procter & Gamble's chairman, president and chief executive officer, said the US-based company liked the "steady, broad-based growth of the OTC Health Care market" and was pleased to add the Consumer Health portfolio and people of Germany's Merck to the Procter & Gamble family.

The purchase price represents 3.7-times Merck Consumer Health's worldwide sales in 2017, which were up by 7.6% on an organic basis to EUR911 million. The rise as reported was around 6%, following a negative currency effect of 0.5% and a negative impact of 1.0% due to portfolio changes.

Merck "replaces and improves upon" PGT

Procter & Gamble pointed out that Merck Consumer Health would "replace and improve upon the highly-successful PGT Healthcare joint venture" with Teva.

The two companies combined their OTC operations in all markets outside of North America in the PGT Healthcare joint venture in November 2011. US-based Procter & Gamble holds 51% of the venture, with Teva taking the remaining 49%.

Inside North America, Procter & Gamble retains full ownership of its OTC operations. As Procter & Gamble was already one of the leading players in the US, there was no need for a joint venture with Teva.

Israeli generics giant Teva announced in early 2018 that it was exploring all options for PGT Healthcare (click here to read the News story).

Merck Consumer Health complements Procter & Gamble's strength in the US. The business has a significant presence in the Asia-Pacific region, Europe, Latin America, and the Middle East and Africa, but not in China and the US. The top markets of its 44 active countries include Brazil, France, Germany, India, Indonesia, Mexico, Poland and the UK.

Procter & Gamble said that acquiring Merck Consumer Health would improve its OTC geographic scale, brand portfolio and category footprint in the vast majority of the world’s top 15 OTC markets.

The US-based company said it would gain a "fast-growing portfolio of differentiated, physician-supported brands across a broad geographic footprint".

Merck's leading brand is Neurobion

Merck Consumer Health's largest brand in 2017 was the Neurobion nerve care line – including the Dolo-Neurobion, Dexabion and Gavindo brands – which achieved an 11.9% organic rise in worldwide sales to EUR309 million.

The portfolio also includes the Bion, Femibion and Seven Seas vitamins, minerals and supplements (VMS) brands as well as Nasivin nasal decongestants.

Procter & Gamble said the brands provided great solutions for relieving muscle, joint and back pain, colds and headaches, as well as supporting physical activity and mobility. The company noted that many of these treatment areas were not currently addressed in its portfolio.

Procter & Gamble pointed out that the deal would also give it "strong healthcare commercial and supply capabilities, deep technical mastery and proven consumer healthcare leadership that will complement Procter & Gamble's existing consumer Health Care capabilities and brands such as Vicks, Metamucil, Pepto-Bismol, Crest and Oral-B".

Tom Finn, president of Procter & Gamble Global Personal Health Care, said the leading brands and great employees of Merck Consumer Health would complement the Personal Health Care business very well.

"This acquisition helps us continue to drive sales and profit growth for Procter & Gamble by providing the capabilities and portfolio scale we need to operate a winning global OTC business on our own, without the aid of a healthcare partner," added Finn.

Procter & Gamble noted that the PGT Healthcare joint venture had delivered disproportionate top- and bottom-line growth and established a major presence in more than 50 countries since its formation.

Strategies no longer aligned

"Following a recent review," added the company, "Teva and Procter & Gamble concluded that priorities and strategies were no longer aligned and agreed to terms where it would be mutually beneficial to terminate the partnership."

Termination of the joint venture would not result in any significant net financial transfer between the two companies, according to Teva, and product assets within PGT Healthcare would return to their respective parent companies.

Teva said it would continue to build its OTC business after the PGT Healthcare joint venture ended on 1 July 2018 (click here to read the News story).

Merck's chairman and chief executive officer, Stefan Oschmann, said that divesting Merck Consumer Health was an important step in the German company's strategic focus on innovation-driven businesses within Healthcare, Life Science and Performance Materials. "It is a clear demonstration of our continued commitment to actively shape our portfolio as a leading science and technology company,” he said.

"With Procter & Gamble," added Oschmann, "we have found a strong, highly-recognised player which has the necessary scale to successfully drive the business going forward."

Germany's Merck announced on 5 September 2017 that it was considering a range of strategic options for its Consumer Health business, including divestment (click here to read the News story).

Merck expects to complete the sale of Merck Consumer Health by the end of 2018.

Additional information added 1 December 2018
Procter & Gamble has completed the acquisition of Merck Consumer Health.

Read all about the strategies of important OTC players – including Procter & Gamble, Merck and Teva – in the OTC Company Strategies 2018 Report published by the OTCToolbox website in March 2018.
– 270 pages
– Executive Summary of key global OTC/consumer healthcare trends
– 18 OTC/consumer healthcare Company Strategy Profiles
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