P&G ditches Pfizer, picks Merck’s consumer health business

After weeks of offers and speculations, a deal has finally been struck in the consumer health space, though not really in an expected manner. Procter & Gamble (PG) has ditched Pfizer’s (PFE) consumer health unit to buy the same business of rival Merck (MRK), which was eyed by Mylan NV (MYL).

P&G was willing to pay $15 billion for Pfizer’s consumer health unit, but the latter demanded nothing short of $20 billion. However, instead of raising the bet, P&G found another seller in Merck and bought their consumer health business for about $4.21 billion.

This is one of the biggest deals P&G has made since appointing Nelson Peltz to its board, despite him losing the months-long proxy fight.

Pfizer’s consumer health unit, which includes ChapStick lip balm, painkiller Advil, and Centrum vitamins, is nearly three times bigger than Merck’s consumer health unit. With no potential buyers, Pfizer’s sales process has, at least for the time being, come to a halt.

P&G found another seller in Merck and bought their consumer health business for about $4.21 billion.

Over the recent times, several drug makers have been putting their consumer health units on sale as it turned out to be a tough business. Apart from Pfizer and Merck, Novartis has also sold its interest in a consumer joint venture to GlaxoSmithKline.

P&G is under intense pressure to drive growth in key markets. The Cincinnati-based giant, which is due to report quarterly earnings on April 20, has also been struggling with declining revenue in its Gillette razor business. The Gillette business was once the most profitable unit for the company.

By adding Merck’s consumer health products to its existing portfolio of Oral B toothpaste, Vicks cold medicine, and Crest, P&G aims to strengthen its consumer health products segment. This unit generated nearly 12% of P&G’s total revenue for the fiscal year ended June 30.

Post this deal, P&G will end its consumer care joint venture — formed in 2011 — with Teva Pharmaceuticals on July 1.