M&As seems to be all the rage for pharmaceutical companies these days. First, GlaxoSmithKline and Novartis combined forces, swapping more than $20 billion in assets to merge elements of each company’s consumer drug business. Then, Pfizer bid more than $100 billion for competitor AstraZeneca, in an attempt to become one of the world’s largest drug companies. And now, German drug maker Bayer has followed that up by purchasing a key facet of Merck’s business, becoming one of the world’s largest providers of over-the-counter products as a result.
Bayer will purchase Merck’s consumer care business for $14.2 billion, the company announced on May 6. This will give Bayer control of many well-known brands, including Claritin, Coppertone, Afrin and Dr. Scholl’s.
In addition, the two companies entered into a co-development and commercialization partnership concerning the treatment of cardiovascular diseases. Through the terms of the agreement, Merck will make an up-front payment of $1 billion to Bayer, and will continue payments of up to $1.1 billion until sales goals are hit.
“This acquisition marks a major milestone on our path towards global leadership in the attractive nonprescription medicines business,” said Bayer CEO Marijn E. Dekkers in a statement following the acquisition.
Merck, meanwhile, said that this deal allows the company to focus its efforts in key areas, such as the discovery and sale of new drugs. “The sale of our consumer care business is part of our efforts to ensure that assets within our portfolio align with our core strategy, have industry-leading potential and generate long-term shareholder value,” said Kenneth C. Frazier, Merck chairman and CEO, in a statement.
Merck’s consumer care business generated about 70 percent of its revenue in the United States, according to The New York Times. The Times also said that Morgan Stanley and the law firms Fried Frank Harris Shriver & Jacobson and Morgan, Lewis & Bockius, advised Merck on the sale.
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