Consumer products company announces huge merger and acquisition

Claritin, Coppertone and other health care products utilized by Minnesota consumers may be under new control according to a May 2 announcement. The German pharmaceutical company Bayer said that it will acquire Merck’s consumer care business for $14.2 billion. Bayer will become one of the largest providers of over-the-counter drugs under this consolidation. Last year, this combination would have earned $7.6 billion in revenues.

The companies also entered into a co-development and commercialization agreement concerning cardio-vascular disease treatment. Merck will make an initial $1 billion payment followed by additional payments of up to $1.1 billion for achieving sales milestones.

Bayer also expects to record $500 million in one-time costs relating to consolidating the two companies. The deal must undergo regulatory compliance review and is expected to close in later 2014.

Bayer seeks to expand well-known products in its consumer lines such as Bayer aspirin, the painkiller Aleve and Flintstones vitamins. It is also seeking global expansion of some of Merck’s most popular American products such as Claritin, Afrin and Coppertone in Europe and emerging countries. The $14.2 billion purchase price includes a payment covering the sales of Claritin and Afrin in countries where a prescription is still required for these products.

In April, the pharmaceutical companies Novartis and GlaxoSmithKline joined forces to become a potential rival. These companies agreed to trade over $20 billion in assets and to combine Novartis’ over-the-counter pharmaceutical business with Glaxo’s consumer drug business. These consolidations show a trend in the consumer products industry where these companies seek better bargaining power with major drugstore chains such as Walgreens and CVS for more shelf space.

These mergers & acquisitions involve substantial business planning and legal advice. Their success relies on compliance with numerous and technical laws and regulations.

Source: The New York Times, “Bayer deal to expand consumer business with Merck deal,” Chad Bray and Katie Thomas, May 6, 2014

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