Bayer to buy Merck's consumer care business for $14.2bn
"This acquisition marks a major milestone on our path towards global leadership in the attractive non-prescription medicines business. “At the same time we are leveraging our capabilities in the cardiovascular therapeutic area," said Bayer CEO Dr. Marijn Dekkers.
In a related transaction, Bayer has entered into a global co-development and co-commercialization agreement with Merck & Co., Inc. in the field of soluble guanylate cyclase (sGC) modulators, for which Merck & Co., Inc. will make an up-front payment to Bayer of USD 1 billion, with substantial additional sales milestone payments.
The acquisition will give Bayer the global number two position in non-prescription (over-the-counter, OTC) products following recently announced consolidations in this highly attractive and growing healthcare industry segment, and will significantly enhance Bayer’s business across multiple therapeutic categories and geographies.
Merck & Co., Inc.'s consumer care business includes leading brands such as Claritin, Coppertone and Dr. Scholl’s. Pro forma sales of the combined businesses in 2013 amounted to $7.4 billion (EUR 5.5 billion) with Merck & Co., Inc.’s business contributing approximately $2.2 billion.
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.
The acquisition will be primarily treated as an asset purchase, for which Bayer expects to receive significant tax savings from the first year after closing.
Bayer also expects the integration of the businesses to generate significant cost synergies, for example in marketing spend and cost of goods, in the region of $200 million per year by 2017. Revenue synergies from increased commercial presence and leveraging Bayer’s substantial global infrastructure in key growth regions to roll out the Merck brands ex-US are expected to amount to already about $400 million by 2017. Bayer anticipates one-time costs of approximately USD 0.5 billion related to executing the transaction and combining the businesses, primarily in 2014/2015. ■