Published: Sat, April 21, 2018
Economy | By Melissa Porter

P&G reports flat 3Q profit, buys Merck unit

P&G reports flat 3Q profit, buys Merck unit

The Procter & Gamble Company (P&G) has agreed to acquire consumer health business of Merck for approximately US$4.2 billion.

GSK had been left as sole bidder for the Pfizer unit, valued at around $15-20 billion after Reckitt Benckiser made a decision to pull out.

Prescription-free remedies are associated with stable sales and that is in a major way attributed to customers' brand loyalty and that is at relatively lower margins as compared to what happens with the pharmaceuticals. This complements the company's existing consumer healthcare capabilities and brands such as Vicks, Metamucil, Pepto-Bismol, Crest and Oral-B.

Vincent Meunier, who happens to be an analyst following closely on the latest developments, has moved ahead to state that the price implied a valuation of nearly 4.7 times sales.

Fueled by demand for Olay skin care products and its SK-11 brand, its net sales jumped 4.3% to US$16.3bn from the year-ago quarter, which came in above Wall Street analysts' forecast of US$16.2bn.

"This will help (Merck) focus on its pharma unit and refurbish its pipeline", he said.

The transaction "replaces and improves upon" the PGT joint venture with Teva Pharmaceutical, which will be terminated July 1, P&G says.

Shares in Merck rose 2.9% to the top of the German blue-chip DAX index in pre-market trade at brokerage Lang & Schwarz.

Both the listed subsidiaries of the United States giant - P&G Health and Hygiene and Gillette India - have seen their earnings multiples improve over the years and trade at 75 and 80 times their trailing earnings and 13 and 12 times sales, respectively.

As a part of this deal, the acquirer (P&G) has signed an agreement to acquire 51.8% equity stake in Merck's Indian arm, Merck Ltd from three promoter/promoter group entities i.e. (1) Emedia Export Company MBH (21.29% of share capital) (2) Merck Internationale Beteiligungen GmbH (18.62%) and (3) Chemitra GmbH (11.89%). Merck's $1 billion consumer health business grew 6 percent over the past two years and provides a range of products for muscle, joint and back pain, colds and headaches, according to the statement. JP Morgan acted as financial adviser to Merck on the transaction, and Freshfields Bruckhaus Deringer acted as a legal adviser to Merck.

Like this: