Bayer acquires Merck's OTC portfolio for $14.2 billion

LEVERKUSEN, Germany — Bayer on Tuesday agreed to acquire the consumer care business of U.S. pharmaceutical company Merck for a purchase price of $14.2 billion. 

“This acquisition marks a major milestone on our path toward global leadership in the attractive nonprescription medicines business," stated Bayer CEO Marijn Dekkers. “At the same time we are leveraging our capabilities in the cardiovascular therapeutic area.” In a related transaction, Bayer has entered into a global co-development and co-commercialization agreement with Merck in the field of soluble guanylate cyclase modulators, for which Merck will make an up-front payment to Bayer of $1 billion, with substantial additional sales milestone payments.

The OTC acquisition will give Bayer the global No. 2 position in nonprescription products following recently announced consolidations in this growing healthcare industry segment, and will significantly enhance Bayer’s business across multiple therapeutic categories and geographies. Merck's consumer care business includes leading such brands as Claritin, Coppertone and Dr. Scholl’s. Pro forma sales of the combined businesses in 2013 amounted to $7.4 billion with Merck’s business contributing approximately $2.2 billion. “We are adding significant scope and earnings power to a business that is already delivering strong margins and stable cash flows,” added Dekkers. 

“With this transaction, we are acquiring leading product brands that will make Bayer the OTC leader in North America and Latin America and also move us into top global positions in key OTC product categories,” said Olivier Brandicourt, CEO of Bayer HealthCare. “The strong Bayer brand will help to further leverage the already successful product brands worldwide. We expect particularly strong growth in key countries outside the U.S. where our superior commercial presence will drive sales of the combined business.” 

Upon completion of the acquisition, Bayer is expected to achieve global leadership positions in dermatology and gastrointestinals and advance to the No. 2 position in the cold, allergy, sinus and flu category. Bayer will remain No. 2 in nutritionals and No. 3 in analgesics.

The purchase price of $14.2 billion includes a payment associated with sales of Claritin and Afrin in certain countries where these products are still prescription-only. The purchase price represents a 2013 pro forma EBITDA multiple of 21x. 

In 2013, Merck’s consumer care business generated approximately 70% of its sales in the US, where it also holds leading brand positions. The business is primarily comprised of products in the cold, allergy, sinus & flu, dermatology (including sun care), foot health and gastrointestinal categories. The most important brands are Claritin (allergy), Coppertone (sun care), Dr. Scholl's (foot health), MiraLax (gastrointestinal) and Afrin (cold). 

The merged business is to be headquartered at the Bayer site in Whippany, N.J. 



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