This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bayer to Pay $14.2B for Merck OTC Unit

BERLIN (The Deal) -- Germany's Bayer on Tuesday agreed to buy the over-the-counter business of Merck (MRK - Get Report) as major deals continue to reshape the global pharmaceutical landscape.

The Leverkusen, Germany-based company said it would pay $14.2 billion to add Claritin allergy medications and Dr. Scholls footcare products to its arsenal of non-prescription treatments.

"With this transaction, we are acquiring leading product brands that will make Bayer the over-the-counter leader in North America and Latin America and also move us into top global positions in key over-the-counter product categories," said Bayer HealthCare CEO Olivier Brandicourt in a statement.


WATCH:
Bayer Snares Merck Unit as Global Indices Waver
More videos from Brittany Umar

Must Read: GE Offers New Talks With France Over Alstom bid

Global drug companies are feverishly opening their wallets to expand in what they see as their key businesses. The deal will make Bayer the world's No. 2 non-prescription drugs company behind London's GlaxoSmithKline (GSK - Get Report), which is currently folding its OTC activities into those of Basel-based Novartis (NVS - Get Report).

The deal between Glaxo and Novartis also has Novartis buying Glaxo's oncology business in exchange for Novartis' vaccines. Novartis is also selling its animal health unit to Indianapolis-based Eli Lilly and Co. Meanwhile, New York's Pfizer (PFE - Get Report) is trying to spend 63.1 billion pounds ($107 billion) to buy London-based AstraZeneca (AZN - Get Report) and become an oncology heavyweight.

Bayer late last month became the perceived winner in the auction for the Merck business after the U.K.'s Reckitt Benckiser said it was no longer in talks with Merck.

The purchase price represents a proforma multiple of 21 times 2013 Ebitda, according to Bayer. The Merck activities last year had sales of $2.2 billion and the German buyer expects to eke out $200 million in annual synergies by 2017 and boost sales by an additional $400 million a year by expanding Merck's brands outside the U.S.

Bayer is founding corporate father of OTC remedies after one of its scientists discovered aspirin in the 19th century. The company began beefing up its non-prescription division in 2004 with the 2.4 billion euro ($3.3 billion) acquisition of Roche Holding's OTC business.

Then, earlier this year, it further expanded the retail division with an agreement for Chinese OTC and herbal medicine specialist Dihon Pharmaceutical Group Co. Ltd. No price was given in that deal but Dihon has annual sales of 123 million euros ($171.4 million).

OTC drugs isn't the only business that has caught Bayer's eye: in February the company succeeded with its 17.6 billion Norwegian kroner ($3 billion) offer for Norwegian partner Algeta. Algeta and Bayer have jointly developed a prostate cancer treatment.

But the Merck purchase is Bayer's largest since it paid 16.3 billion euros in 2006 as part of a white-knight bid for Berlin's Schering that made it the world's biggest contraceptive manufacturer.

Bayer said it would finance the deal initially with a loan from Bank of America Merrill Lynch, BNP Paribas SA and Mizuho Bank Ltd. The loan will eventually be syndicated and the company said it would also potentially turn to capital markets.

The acquisition is expected to close in the second half of this year.

To finance the purchase, Bayer may also peddle its plastics division. The company is rumored to be shopping the unit, known as its material science division, which analysts say could fetch more than $10 billion.

Bayer shares slipped 0.81 euro to 99.14 euros in afternoon Frankfurt trading.

Morgan Stanley and JPMorgan Securities acted as financial advisers to Merck, with a Fried Frank Harris Shriver & Jacobson LLP team including David Shine and Abigail Bomba and Morgan Lewis & Bockius LLP's Alan Leeds, Randall Sunberg, David Glazer serving as counsel in connection with the transaction.

--David Marcus contributed to this report.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AZN $31.47 2.50%
GSK $40.39 2.30%
NVS $94.70 0.02%
MRK $52.58 0.10%
PFE $31.60 0.77%

Markets

Chart of I:DJI
DOW 16,191.14 +132.79 0.83%
S&P 500 1,920.84 +6.99 0.37%
NASDAQ 4,662.4790 +26.3740 0.57%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs