Bayer to acquire Merck & Co. Inc. consumer care business for $14.2B

LEVERKUSEN—Bayer has announced that it will acquire Merck & Co., Inc.’s consumer care business for $14.2 billion, a purchase price that includes a payment associated with sales of Claritin and Afrin in certain countries where the drugs are still prescription-only and represents a 2013 pro-forma EBITDA multiple of 21x. Bayer expects significant cost synergies from the acquisition and consequent integration of Merck’s consumer care business, with revenue synergies to the tune of approximately $400 million by 2017. The transaction is forecast to yield an immediate positive contribution of 2 percent to core earnings per share in the first year after closing, and is expected to close in the second half of this year.

“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,” Olivier Brandicourt, CEO of Bayer HealthCare, said in a press release. “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.”

Merck & Co.’s consumer care business consists primarily of products in the cold, allergy, dermatology, foot health, gastrointestinal and sinus and flu categories, with leading brands such as Claritin, Dr. Scholl’s, Coppertone and MiraLAX. The business employs some 2,250 people, and the merged business will be headquartered at Bayer’s Whippany, N.J. site.

“This acquisition marks a major milestone on our path towards global leadership in the attractive non-prescription medicines business,” Bayer CEO Dr. Marijn Dekkers commented in a statement. “At the same time, we are leveraging our capabilities in the cardiovascular therapeutic area.”

“We are adding significant scope and earnings power to a business that is already delivering strong margins and stable cash flows,” he added.

Bayer and Merck have also inked a strategic pharma collaboration in cardiovascular diseases with a focus on sGC modulation. The companies will share costs and profits from the sGC modulators equally, moving forward with a joint development and commercialization strategy. The collaboration includes Adempas, which has already been approved for the treatment of certain classifications of pulmonary hypertension and is being developed in additional life-cycle indications, and vericiguat, an investigational compound currently under development in a pair of Phase 2b studies in worsening chronic heart failure. sGC modulators currently in early stages of research and development may also be included later.

Per the terms of the agreement, Merck will pay Bayer up to $2.1 billion, consisting of an upfront payment of $1 billion and sales milestone payment of up to $1.1 billion tied to future collective sales of certain collaboration compounds, including Adempas.

Bayer will be in charge of commercialization of Adempas in the Americas while Merck oversees commercialization outside those countries. Bayer will lead commercialization of vericiguat and other potential sGC modulators outside of the Americas while Merck handles commercialization within the Americas. Both companies will have an option to co-promote Adempas and follow-on sGC modulators in each other’s territories.

SOURCE: Bayer press release