Procter & Gamble said Thursday it will buy Merck’s consumer health business for 3.4 billion euros ($4.2 billion) in a move that will add such vitamin brands as Seven Seas to its lineup of over-the-counter medicines.
P&G said the deal would improve the geographic scale, brand portfolio and category footprint in the vast majority of the world’s top 15 OTC markets. German-based Merck’s consumer health brands, which generate close to $1 billion in annual sales, also include Febimion women’s supplements and the Nasivin nasal decongestant.
The acquisition will replace P&G’s healthcare joint venture with Teva Pharmaceuticals, which was formed in 2011 and will be terminated on July 1.
“The consumer health business of [Merck] brings a strong set of brands, products and capabilities, and provides an attractive and complementary footprint to further fuel growth as we continue to grow our existing leading brands,” Steve Bishop, president of P&G’s Global Health Care unit, said in a news release.
P&G has been under pressure to increase sales from activist investor Nelson Peltz. On Thursday, it also reported another quarter of weak sales growth and shrinking profit margins as it contends with discounting from retailers and declining pricing power for its decades-old brands.
The world’s largest consumer goods maker generated 12% of group sales, or $7.5 billion, from health-care products last year, including Vicks cold relief, Pepto-Bismol, and Oral-B toothbrushes and toothpastes.
Over-the-counter remedies “offer stable sales due to customers’ brand loyalty, albeit at lower margins than pharmaceuticals,” Reuters noted, while adding that intense price competition online as well as cheaper store-brand products have weighed on profits in the U.S. and other Western markets.
Merck offers a “branded goods business which carries higher than average company margins,” P&G CFO Jon Moeller said.
The deal follows GlaxoSmithKline’s move to buy Novartis out of their consumer healthcare joint venture for $13 billion. Merck, which has been seeking to focus on its prescription drug business, had sought as much as 4 billion euros for its consumer health unit.