Suitors size up Merck's consumer unit for potential $10B deal: Reuters

Shoppers are already eyeing Merck & Co.'s ($MRK) consumer healthcare unit. As Reuters reports, consumer companies have approached the U.S.-based drugmaker, attracted by well known brands such as Coppertone sunscreen and Dr. Scholl's foot products--and a deal could be worth up to $10 billion.

Merck CEO Kenneth Frazier

Merck CEO Kenneth Frazier said late last year that he's weighing his options in consumer healthcare, a unit he has said needs to either grow or go. Should the company sell or spin off the unit, as Pfizer ($PFE) did with its nutrition and animal health businesses? Or perhaps trade it away to Novartis ($NVS)? The Swiss drugmaker is also reviewing its smaller businesses, including animal health and vaccines operations that would complement Merck's, and recent word is that swap talks have been underway.

But meanwhile, Reuters sources say Morgan Stanley is helping Merck entertain potential buyers. Among them, industry-watchers say, could be Britain's Reckitt Benckiser and U.S.-based Procter & Gamble ($PG). Both companies sell over-the-counter meds and other consumer health products, and Reckitt has said it's looking to make some deals in the arena.

As Reuters notes--and Frazier laments--Merck's consumer health business is relatively small, with just about 1% of the market. Other Big Pharma companies have bigger footprints in consumer health, including Johnson & Johnson ($JNJ), GlaxoSmithKline ($GSK), Novartis ($NVS), Sanofi ($SNY) and Bayer. Novartis Chairman Joerg Reinhardt has said that his company could make deals in the $10 billion range, and Bayer also has some significant firepower.

Sanofi already spent $1.9 billion to buy the U.S.-based consumer health business Chattem, so adding on might not be a priority; then again, that was almost four years ago, and Merck's Claritin business could augment its own Allegra allergy franchise. Meanwhile, Merck KGaA has a small consumer business, and has said it plans to keep the unit and perhaps grow it via dealmaking, but a deal that size could be beyond its scope.

Of course, the Merck deal action is part of a wider trend in the pharma industry. Pfizer has a successful spinoff and a couple of sales under its belt, and it has reorganized internally into three distinct units as it contemplates more. Abbott Laboratories ($ABT) already spun off its pharma unit, AbbVie ($ABBV), and Novartis is looking at all its smaller businesses, whether for sale or expansion via acquisition, partnerships, joint ventures, et al. GlaxoSmithKline has jettisoned a variety of brands, including prescription, OTC and consumer.

- read the Reuters news

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