Date: 2014-10-01
Type of information: Company acquisition
Acquired company: consumer care business of Merck&Co (USA - NJ)
Acquiring company: Bayer (Germany)
Amount: $14.2 billion (€10.4 billion)
Terms: * On October 1, 2014, Bayer has completed the acquisition of the consumer care business of Merck & Co.The transaction closed on October 1, 2014, following receipt of required antitrust approvals. Bayer paid a purchase price of $ 14.2 billion, less certain contingent amounts held back that will be payable upon antitrust approvals in Mexico and the Republic of Korea. Integration of the acquired business has been successfully initiated. The purchase price of $ 14.2 billion includes a payment associated with sales of Claritin™ and Afrin™ in certain countries where these products are still prescription-only. Bayer also expects the integration of the businesses to generate significant cost synergies - particularly in marketing spend and cost of goods - in the neighborhood of $ 200 million per year by 2017. Revenue synergies from increased commercial presence and leveraging Bayer’s substantial global infrastructure in key growth regions to roll out the Merck brands ex-US are expected to amount to approximately $ 400 million by 2017. Bayer anticipates one-time costs of approximately $ 0.5 billion for executing the transaction and combining the businesses, primarily in 2014/2015. The acquisition is expected to yield a positive contribution of 2 percent to core earnings per share already in the first year after closing. The acquisition has been financed with a bridge facility, with part of this loan already redeemed using two hybrid bonds amounting to $ 3.25 billion. Bayer plans to issue additional bonds for further financing on the capital market. Approximately 2,000 employees from Merck & Co., Inc. and 8,800 from Bayer will be brought together under one roof in Bayer's new consumer care business. The integration process is off to a successful start with the decision on appointments to the top two management levels. The third management level is expected to be completed in the autumn of 2014. The management team of the merged businesses will be located at existing Bayer sites in Whippany, New Jersey, United States; Basel, Switzerland; Shanghai, China; Leverkusen, Germany; and Singapore. Bayer also expects the integration of the businesses to generate significant cost synergies - particularly in marketing spend and cost of goods - in the neighborhood of $ 200 million per year by 2017. Revenue synergies from increased commercial presence and leveraging Bayer’s substantial global infrastructure in key growth regions to roll out the Merck brands ex-US are expected to amount to approximately $ 400 million by 2017. Bayer anticipates one-time costs of approximately $ 0.5 billion for executing the transaction and combining the businesses, primarily in 2014/2015. The acquisition is expected to yield a positive contribution of 2 percent to core earnings per share already in the first year after closing. The acquisition has been financed with a bridge facility, with part of this loan already redeemed using two hybrid bonds amounting to € 3.25 billion. Bayer plans to issue additional bonds for further financing on the capital market. * On May 6, 2014, Bayer has agreed to acquire the consumer care business of U.S. pharmaceutical company Merck & Co, for a purchase price of $14.2 billion (€ 10.4 billion). This purchase price includes a payment associated with sales of Claritin™ and Afrin™ in certain countries where these products are still prescription-only. The purchase price represents a 2013 pro forma EBITDA multiple of 21x. The acquisition will be primarily treated as an asset purchase, for which Bayer expects to receive significant tax savings from the first year after closing. Bayer plans to finance the acquisition with a bridge facility provided by Bank of America, Merrill Lynch, BNP Paribas and Mizuho, which subsequently will be syndicated to a larger group of relationship banks. The capital market take-out is planned at a later date with a combination of senior and hybrid capital instruments. The acquisition is expected to yield an immediate positive contribution of 2 percent to core earnings per share already in the first year after closing. The transaction is subject to approval from the relevant antitrust authorities, with closing expected in the second half of 2014.
Details: The combined consumer care business is headed by Erica Mann, member of the Bayer HealthCare Executive Committee and responsible for the Consumer Care division. The acquisition will give Bayer the global number two position in non-prescription medication - behind the combined OTC businesses of Novartis and GSK, following the completion of their announced joint venture in 2015, and ahead of the world's previous industry leader Johnson & Johnson. Bayer is now the OTC leader in North and Latin America and the leader in dermatology and gastrointestinal treatments, two of the five most important non-prescription health care product categories. The company has advanced to the number two position in the cold, allergy, sinus and flu category and remains the number two in nutritionals and number three in analgesics. The consumer care business acquired from Merck & Co., Inc. is primarily comprised of products in the cold, allergy, sinus & flu; dermatology (including sun care); foot health; and gastrointestinal categories. The most important brands are Claritin™ (allergy), Coppertone™ (sun care), MiraLAX™ (gastrointestinals), Afrin™ (cold) and - in North and Latin America - Dr. Scholl’s™ (foot care). These brands complement Bayer's existing OTC portfolio, which includes brands such as Aspirin™ and Aleve™ in the analgesics category, dermatology products including Canesten™ and Bepanthen™/Bepanthol™, nutritional brands such as Supradyn™, One A Day™, Berocca™, Elevit™ and Redoxon™, antacids such as Rennie™ and Talcid™, and cough-and-cold products such as Alka-Seltzer Plus™ and White & Black™. Merck & Co., Inc.'s consumer care business has approximately 2,250 employees and is headquartered in New Jersey (United States). Production is located in Cleveland, Tennessee, United States; Chatsworth, Georgia, United States; Pointe Claire, Quebec, Canada; and Shanghai, China. Sun care and foot health research as well as distribution are based in Memphis, Tennessee, United States. The merged business is to be headquartered at the Bayer site in Whippany, New Jersey, United States.
Related: OTC
