Is Merck’s Consumer Health Unit Going to the Maker of Durex?
Rumors surrounding the sale of Merck’s (NYSE:MRK) consumer health unit should soon be put to rest, according to reports from Reuters and Bloomberg. Merck is in final talks with British company Reckitt Benckiser (RBGLY.PK) regarding the unit, which currently makes name brands like Claritin allergy medicine and Coppertone sunblock. Reuters reports that the company is expected to buy the unit for about $14 billion.
Other bidders in the running along with the Slough, England-based Reckitt Benckiser are Procter & Gamble (NYSE:PG) and Bayer AG (BAYRY.PK), Bloomberg reports. Should Reckitt Benckiser, perhaps best known for making the Durex line of condoms, succeed in purchasing Merck’s consumer health business, the company would become the world’s third-largest producer of consumer health products. Currently, Reckitt Benckiser ranks just ninth in the same category.
Despite the fact that talks between the two companies are now in their final stages, Reckitt Benckiser says it isn’t taking any risks. “We understand that we are part of a competitive process,” the company said Monday in a statement, per Bloomberg. “There is absolutely no certainty as to the outcome or timing of this process.”
The other potential frontrunner for the Merck unit is Bayer AG; both Bayer and Reckitt Benckiser offered the drug maker $13.5 billion for its business. Reuters notes that because both companies are very eager to buy the unit, it’s possible that the price tag could go up in the next several days.
Reuters reports that consumer health businesses have become more attractive to companies like Benckiser, Bayer, and Procter & Gamble recently due to an aging population, skyrocketing healthcare costs, and an increased interest in health and wellness among the general public. Further, a divestment by Merck isn’t exactly surprising, given the current climate surrounding the healthcare businesses, which has been rife with merger and acquisition deals in the past few weeks as drug makers continue to shift their focus back into their best businesses.
Merck’s consumer health unit reported $1.9 billion in sales last year, Reuters says. That’s down 3 percent from 2012, after the termination of certain distribution agreements in China.