Various sources have suggested that the world’s biggest food and nutrition company have submitted the highest bid for Merck’s consumer health unit, while other possible buyers including generic drug manufacturer Perrigo and the equity firm behind German drug firm Stada have both dropped out of the process.
The news potentially paves the way for a €4.1 billion deal during the first quarter of 2018, Reuters suggested. However, Nestlé may still face competition from Reckitt Benckiser and Mylan.
Deal background
In September last year, Merck confirmed that it was exploring options for its consumer health business, with options including a either full or partial sale.
The division generated €860 million ($1.03 billion) revenue for 2016.
“We expect increasing internal constraints to fund the business to reach the required scale. Fully anticipating this, we are preparing strategic options,” Belén Garijo, head of Merck’s healthcare business, said in a statement.
“Any possible proceeds from a potential transaction would be used to deliver on the company’s overall financial targets,” she said.
A good fit?
On the other side of the deal, Nestlé has long-held ambitions in consumer health – and has move distinctly in the direction of nutrition and healthcare in recent years. Last year saw the firm pick up Atrium Innovations for $2.3bn (€1.9bn) and stump up further investment into the microbiome therapeutics space with a €20 million investment in a joint-venture with Enterome.
Nestlé is also widely expected to wrap up the sale of its US confectionery businesses for an expected $2.8bn (€2.3bn). While both Hershey and Ferrero are reportedly doing battle for the business unit, reports suggest that Ferrero came out on top of a recent auction for the business.
In an investor note last month, Alain Oberhuber of MainFirst said the structure of Merck’s consumer health business is a good fit for Nestlé – adding that the global food and nutrition giant could be interested in all of Merck’s consumer health activities.
Merck groups its consumer health business into three groups, he noted.
- Mother’s & Family Health – dedicated to the specific health needs of women, children and families under the brands: femibion, Sangobion, Nasivin and Seven Seas
- Energy & wellbeing – with the brands of Vivera, Floratil, Vigantoletten and Bion
- Mobility – with brands Neurobion, Kytta and Dolo-Neurobion
"We conclude that Nestlé could be interested in all three businesses,” he wrote – noting that Nestlé’s former activities with Powerbar are similar to Merck products in its Mobility business.
“Nestlé [also] has a broad range of baby infant formula and baby nutrition products, which could be a good fit to Merck’s Mother’s & Family Health activity should these also be acquired from Merck,” concluded Oberhuber. “Even Merck’s Energy & Well-being could be a product extension, which would make sense.”