Procter & Gamble, the world’s largest consumer goods company, is taking over Merck Ltd, the listed Indian arm of the German drug maker, as part of its $4.2 billion global acquisition of Merck’s consumer health business.
According to the transaction announced on Thursday, P&G will acquire 51.8 per cent in Merck Ltd for about Rs 12.9 billion, triggering an open offer for an additional 26 per cent stake. The open offer will be executed at Rs 1,500.36 per share aggregating Rs 6.47 billion, P&G and Merck said.
The deal is expected to enhance P&G’s consumer health play in the domestic market, with the company gaining access to vitamin brands such as Seven Seas and Neurobion from Merck’s portfolio apart from nasal decongestant Nasivion.
With this deal, P&G has joined Reckitt Benckiser, Nestle and Unilever, which have increased their consumer health footprint in India in recent years. Reckitt Benckiser manufactures Dettol, while Nestle has a strong nutrition portfolio in India. Unilever, through its Lifebuoy brand, has increased its consumer health portfolio in the country.
The Merck stock jumped 18.6 per cent to Rs 1,791.55 after the announcement on Thursday. Its market capitalisation stood at Rs 29.73 billion on the BSE.
Merck operates in India through listed and unlisted entities, and its core business covers pharmaceuticals, chemicals and laboratory solutions. Sales from the listed entity stood at Rs 10.88 billion in 2017, with pharmaceuticals contributing to around three-fourths of its revenue.
In a recent report, India Ratings & Research said the mature brands in Merck’s consumer health segment contribute around 20-50 per cent of the company’s India revenue, leading in vitamins, and expectorants/nasal decongestant sub-segments.
Merck said it was evaluating options to deal with the non-consumer business in its listed entity, which includes cardiovascular and anti-diabetes drugs and the chemicals business. As part of the current transaction, Merck and P&G have agreed to a number of manufacturing, supply and service agreements, including a takeover of Merck’s Goa plant.