Nestle takes the lead over Mylan, Reckitt in Merck KGaA's $4B-plus OTC sale: report

Out of several potential buyers for Merck KGaA’s consumer health unit, one bidder has risen to the top—and it’s Nestle.

The food giant, on a mission to diversify into healthcare, has emerged as a frontrunner after submitting the highest bid yet to the German drugmaker, Bloomberg reported. Merck is said to be on track to tap an auction winner this quarter, and the unit sale is expected to bring in between $4 billion and $5 billion.

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Companies including Perrigo—which reportedly put together a bid before the December deadline—and private equity players Bain Capital and Cinven have already dropped out, making way for Nestle to take the lead, Bloomberg’s sources said.

That’s not to say there aren’t other suitors still in the mix. Generics giant Mylan and consumer specialist Reckitt Benckiser—which is also taking a hard look at Pfizer’s larger, also-for-sale OTC division—remain in the picture.

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The Darmstadt-based company said back in September that it was weighing options for its consumer portfolio, including a full or partial sale.

“We expect increasing internal constraints to fund the business to reach the required scale,” Belén Garijo, the company’s healthcare CEO, said in a statement at the time, adding that “any possible proceeds from a potential transaction would be used to deliver on the company’s overall financial targets.”

Nestle, meanwhile, has been pushing further into the healthcare space over the last few years. In 2016, it selected pharma veteran Mark Schneider as its next CEO, and it later poached Allergan executive Paul Navarre to head up its skin health business.

Just last month, it inked a $2.3 billion pact to pick up nutritional health products company Atrium Innovations.