Should Bayer sell some of the consumer brands it's buying from Merck ($MRK)? Analysts say a few of them--Coppertone sun products, for instance--don't quite fit with Bayer's product lineup. Buyers appear to be knocking. But Bayer says it will keep those brands, thank you very much.
Rivals are after foot care brand Dr. Scholl's and sunscreen brand Coppertone, each worth more than $1 billion, Reuters' sources say. Reckitt Benckiser, which owns the Scholl brand outside the U.S., could be among them, and Beiersdorf and L'Oreal are on the list of potential suitors, too. Bayer, however, is determined to hang onto its new purchases, part of its $14 billion buyout of Merck's consumer health unit.
"We intend to keep the portfolio acquired from Merck & Co. as a core business," Bayer it said in a statement, as quoted by the news service.
Some have questioned the logic of hanging on to the outsider brands, which "aren't really part of the core business and don't have much to do with medicines in the strict sense," Warburg Research analyst Ulrich Huwald told Reuters. Unloading the pair, which generate 27% of the Merck unit's yearly sales, would allow Bayer to double down and get the most out of healthcare products like allergy med Claritin and laxative MiraLAX, which jibe better with the likes of aspirin, Canesten antifungal creams and Bayer's other current OTC offerings.
|Bayer CEO Marijn Dekkers|
But Bayer CEO Marijn Dekkers has said more than once that his company's aim is to be the world leader in consumer health, and selling off a couple billion-plus sellers won't help toward that end. On the contrary, keeping the brands may help the German pharma up its bargaining power with U.S. drugstore chains like Walgreen Co. ($WAG) and CVS Caremark ($CVS), which prefer to deal with suppliers that can put large amounts of empty shelf space to use.
That might not be Bayer's only motive to keep Merck's brands, however. Selling some consumer brands for a lower earnings multiple than what the companies worked out for the entire Merck bundle could reveal that Bayer forked over too much to buy the unit in the first place--something investors might not appreciate, Reuters points out.
"Shareholders would start to do the maths," a source told the news service.
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