January 31, 2014 / 7:06 PM / 6 years ago

Merck gets buyout interest for consumer health unit: sources

NEW YORK (Reuters) - Merck & Co Inc (MRK.N) has received approaches from large consumer companies interested in buying its consumer healthcare business, best known for Coppertone sunscreen and Claritin allergy medicine, according to people familiar with the matter.

Merck’s consumer healthcare business, which also includes Dr. Scholl’s foot care and other consumer products, could be worth as much as $8 billion to $10 billion in a sale, or roughly four to five times the unit’s annual revenue, some of the people said.

Merck, the No. 2 U.S. drugmaker after Pfizer Inc (PFE.N), is considering alternatives for both its consumer and animal health businesses and has said it expects to complete the review in 2014.

Among a range of options it has considered for the consumer unit, Merck discussed a potential asset swap with Novartis AG NOVN.VX, under which Merck would give up its consumer assets in return for the Swiss drugmaker’s animal health and other units, Reuters and others previously reported.

The probability of carrying out such a deal, however, is currently seen as low due to the complexity of valuing different businesses, prompting Merck to explore an outright sale of its consumer unit as well, people familiar with the matter said.

Merck has been in conversations with several interested parties and is being advised by Morgan Stanley (MS.N) on the process, the people said, asking not to be named because the conversations are private.

For its much larger animal health unit, the second-largest in the industry after Zoetis Inc (ZTS.N), Merck is evaluating the potential of spinning it off as a separate publicly traded company, people familiar with the matter said.

Analysts and people familiar with the industry say big consumer companies such as Reckitt Benckiser Group (RB.L) and Procter & Gamble Co (PG.N) could be logical buyers for Merck’s consumer healthcare business.

Reckitt already owns over-the-counter medicines including Mucinex and Nurofen and the international rights for the Scholl foot care business. Its chief executive told Reuters in a September interview that Reckitt aimed to be a major player in consumer healthcare and has the firepower to do sizeable deals.

Procter & Gamble Co (PG.N) also has a portfolio that includes a range of medicines and beauty products.

Reckitt and P&G declined to comment.

Johnson & Johnson (JNJ.N) is the biggest player in the $200 billion global consumer health industry, with about 4 percent of the market, followed by Bayer AG (BAYGn.DE) and GlaxoSmithKline Plc (GSK.L).

Merck, however, is relatively small with around 1 percent of the market. Merck has said in the past that it views its consumer business as sub-scale.

In considering options for the consumer and animal health businesses, Merck is following in the footsteps of other drugmakers such as Pfizer Inc (PFE.N), which created shareholder value by seperating non-core assets.

Pfizer sold its infant-nutrition business to Nestle SA NESN.VX for $11.9 billion in 2012, and last year spun off its animal health unit as a separate publicly traded company called Zoetis.

Many other drugmakers have been looking to shed businesses, prompted by pricing pressure and increasing competition that has forced a more rigorous approach to capital allocation. They have shown a new willingness to consider whether other companies may be better owners for certain assets.

A Merck spokeswoman declined to comment on details of the strategic review. Morgan Stanley did not respond to requests for comment.

Reporting by Soyoung Kim and Olivia Oran, additional reporting by Arno Schuetze, Martinne Geller and Ben Hirschler; Editing by David Gregorio

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