P&G buys Merck health brands for $4.2B

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FMCG giant Procter & Gamble (P&G) announced today that it has signed an agreement to acquire the German Consumer Health business of Merck KGaA for approximately $4.2 billion. The deal follows GlaxoSmithKline agreeing to buy Novartis out of their consumer healthcare joint venture for $13 billion after dropping its pursuit of Pfizer's consumer unit.

Products marketed by German Merck's consumer division include Seven Seas cod liver oil and Bion3 supplements.

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 offer stable sales due to customers' brand loyalty, albeit at lower margins than pharmaceuticals.

It also provides P&G with strong health care commercial and supply capabilities, deep technical mastery and proven consumer health care leadership that will complement P&G's existing consumer Health Care capabilities, with brands such as Vicks, Metamucil, Pepto-Bismol, Crest and Oral-B.

Morgan Stanley Analyst-Vincent Meunier said that this step would help Merck to focus more on its pharma unit and restore its pipeline. The company is the former parent company of Kenilworth, N.J. -based Merck & Co., which is now independent.

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Slow growth in productivity and high levels of government and private debt are also threats to future growth. The IMF has also strongly criticised the approach of the Trump administration to trade deficits.

The proceeds would allow it to reduce debt faster, giving its businesses, which include chemicals, pharmaceuticals and lab equipment, more flexibility, although it ruled out acquisitions worth more than 500 million euros this year. And it'll also fill a void left by a healthcare joint venture between P&G and Teva, which is set to end July 1.

Merck said between 2015 and 2017, the consumer health business's net sales grew 6%, outpacing the consumer health market's growth of approximately 4% growth over the same period.

It will issue guidance for 2018 to reflect the sale of the consumer healthcare business with it publishes first-quarter financial results on May 15, it said.

P&G shares rose 1.3 percent in post-market trading on Wednesday in NY after shifting its third-quarter earnings report to Thursday morning from an initial plan to release results on Friday.

Merck said the transaction will be executed through the sale of Merck's shares in a number of legal entities as well as various asset sales. The company has sold off under-performing brands in the past decade, and about 3,300 Merck employees could move to P&G.