(Corrects fourth paragraph to read "portfolio acquired from
Merck", not "portfolio acquired by Merck")
* Coppertone, Dr. Scholl's draw interest after $14 bln deal
* Bayer says to hold on to non-drug consumer brands
By Ludwig Burger and Arno Schuetze
FRANKFURT, July 1 German drugmaker Bayer said it
would keep the Dr. Scholl's and Coppertone brands it bagged as
part of a $14 billion buy from U.S. Merck, despite overtures
from companies keen to grab them, widening its healthcare line
to include consumer goods.
Just weeks after clinching the deal to buy Merck 's
non-prescription drugs business, Bayer - best known
as a life sciences company which makes cancer drugs - is being
courted by rivals keen to acquire the foot care and sunscreen
brands, several people with knowledge of the approaches told
But when asked about the expressions of interest for Dr.
Scholl's and Coppertone - each worth more than $1 billion -
Bayer said it was not planning to untie the Merck bundle it
secured in May in a competitive bidding tussle with Reckitt
Benckiser, Procter & Gamble Co and Novartis
"We intend to keep the portfolio acquired from Merck & Co.
as a core business," Bayer said in a written statement.
The German company, which makes contraceptives as well as
prescription drugs against cancer, heart disease and multiple
sclerosis, said when it bought the Merck business that its aim
was to become global leader in over-the-counter (OTC) medicines.
The deal was the largest in the German healthcare sector
since Bayer bought rival Schering for 17 billion euros ($24
billion) in 2006.
But with Bayer's existing OTC medicines business listing
products like aspirin and Canesten antifungal creams, some are
questioning the logic of it wanting to keep everyday products
"They aren't really part of the core business and don't have
much to do with medicines in the strict sense," said Warburg
Research analyst Ulrich Huwald.
Offloading Dr. Scholl's foot care and Coppertone, which
account for 27 percent of the Merck bundle's combined annual
sales, would allow Bayer to focus on Merck's core healthcare
products such as allergy remedy Claritin and MiraLAX laxative,
analysts say, and give it the resources to make the most of
Repeated comments by chief executive Marijn Dekkers in the
past that Bayer - the inventor of aspirin - is mainly about life
sciences and molecular research, seem to have given hope to
consumer goods companies that he might yet have wanted to part
with brands that have little to do with healthcare.
Reckitt Benckiser, which owns the Scholl foot care brand
outside the United States, as well as Beiersdorf and
L'Oreal were seen as potential acquirers. Officials at
the three companies declined to comment.
GOING FOR SHELF SPACE?
There are however sound reasons for Bayer to retain
Coppertone and Dr. Scholl's despite the products being so
different to much of its other business: Big U.S. drug store
chains such as Walgreen Co and CVS Caremark
prefer dealing with suppliers that can fill large amounts of
shelf space and the two big consumer brands would add to Bayer's
Bayer has also said that the Merck deal, which is expected
to close in the second half of the year, should allow it to make
better use of its distribution network and sales force and give
it more clout when dealing with retailers.
There may however be another reason Bayer is reluctant to
sell. Having bought Merck's unit for more than twice the core
earnings multiple at which Johnson & Johnson, the
world's largest consumer care company, is trading, any spin-off
sales might reveal it to have overpaid.
One source said Coppertone and Dr. Scholl's, with $275
million and $309 million in 2013 sales, respectively, could be
worth as much as $4 billion between them, reflecting the sales
multiple of about 6.5 that Bayer paid for the entire Merck
But another person said that Dr. Scholl's was more likely to
fetch $1 billion to $1.5 billion, and Coppertone about $1
billion, because personal care products change hands for lower
multiples than the medicines included in last month's deal.
Selling on some consumer brands for a lower earnings
multiple than what was agreed for the entire Merck portfolio
would exposed the high price paid for the remaining OTC drugs -
and might not go down well with Bayer investors.
"Shareholders would start to do the maths," the source said.
(Additional reporting by Anjuli Davis and Ben Hirschler in
London; Editing by Sophie Walker)