Reports: Bayer closing in on deal for Merck OTC unit with Reckitt out of the way

Bayer CEO Marijn Dekkers

With Reckitt Beckiser out of the race for Merck's ($MRK) consumer health unit, Bayer has the opportunity to make a deal all to itself--and it may be about to capitalize. The German pharma is in exclusive talks with the New Jersey company, reports say, and it could have a $14 billion deal wrapped up in the next few days.

According to Bloomberg's sources, the two sides are both on board with a deal in principle and are working out the details of a formal agreement. Terms would include cash and an asset swap, possibly structured as a joint venture, the news service reports. The New York Times' DealBook says a deal is expected before Merck's Tuesday investor briefing.

That asset swap could include Bayer's animal health unit, which Reuters' sources said it offered up earlier this week. Merck CEO Kenneth Frazier has said animal health, in addition to the on-the-block consumer unit, is a business he wants to shape up or ship out, so a trade with Bayer could kill two birds with one stone. And that prospect may have been the kicker for Reckitt, which dropped out of the running earlier this week citing concerns with the unit's price tag.

Reckitt Benckiser CEO Rakesh Kapoor

"We are a highly disciplined acquirer with strict return metrics, which we will not break," Reckitt CEO Rakesh Kapoor told Reuters in an email Wednesday.

Now, Bayer has a chance to add Merck consumer hits like Claritin and Coppertone sunblock to its own lineup of offerings, which stars the pain med aspirin. It currently sits at No. 3 on the global list of OTC drug sellers, Bloomberg notes, and a deal would help vault the company toward CEO Marijn Dekkers' stated goal of taking the top spot.

For Merck, a pact with Bayer would be the culmination of a lengthy shopping process, which previously included suitors like Sanofi ($SNY) and Procter & Gamble ($PG). And the possible $14 billion it would reap well exceeds earlier bids and analyst estimates--good news for the New Jersey drug giant, badly in need of revenue after taking a top-line beating from generic attackers in 2013.

- see the DealBook story (sub. req.)
- get more from Bloomberg

Special Reports: The top 10 pharma companies by 2013 revenue - Merck - Bayer HealthCare | Pharma's top 10 M&A deals of 2013

Suggested Articles

Turns out Procter & Gamble didn’t want Pfizer’s consumer health unit after all. But it did want Merck KGaA’s.

Private equity firm, in exclusive talks with Sanofi, says it'll invest to pump up Zentiva into an "independent European generics leader."

With suitor Takeda circling Shire, the Dublin-based target has pulled off a deal of its own.