Final bids, which could value the maker of Coppertone sunblock and Claritin allergy medicine at $10 billion to $12 billion, are due next week, two people said, asking not to be identified discussing private information. Reckitt Benckiser Group Plc (RB/), which sells Clearasil acne treatment cream, is the most aggressive bidder making it the frontrunner for the business, three people said.
Drugmakers have been spinning off or selling businesses that they deem too small or slow-growing in order to focus on new drugs and building up market-leading divisions. Merck’s consumer-health sales dropped 3 percent last year to $1.9 billion, out of total sales of $44 billion. Nearly a quarter of the unit’s revenue comes from over-the-counter sales of Claritin, data compiled by Bloomberg show.
“OTC assets are highly desirable for market incumbents as almost no additional infrastructure is required,” Barclays Plc analysts including Michael Leuchten wrote in a note to investors today. The Merck unit “from a geographic perspective would be a good fit” for Sanofi because 70 percent of the revenue comes from the U.S., the analysts said.
Novartis AG (NOVN) has discussed swapping its animal-health business with Merck’s consumer-health unit, people with knowledge of the matter said in January. Bayer AG (BAYN) is also interested in Merck’s consumer business, three people said.
Spokesmen for Sanofi, Reckitt Benckiser, Bayer, Merck and Novartis declined to comment.
Sanofi shares rose 1.7 percent to 74.79 euros at 10:39 a.m. in Paris, valuing the company at 99 billion euros ($137 billion).
Sanofi reported 3 billion euros of sales last year from consumer-health products, including allergy medicine Allegra. Consumer products are one of the growth platforms the company has identified as critical as it moves away from years of reliance on blood thinners and insomnia pills.
The French company’s chief executive officer, Chris Viehbacher, whose signature deal since becoming CEO in 2008 was the $20.1 billion acquisition of Genzyme in 2011, said in an interview last month that he’s not contemplating doing another large deal as he pursues a strategy of partnerships with biotechnology companies.
Reckitt Benckiser, the maker of Durex condoms, has grown its consumer-health business through acquisitions, with the segment now accounting for 28 percent of revenue, according to Sanford C. Bernstein, up from 5 percent in 2005. The Slough, England-based company agreed this month to acquire the K-Y brand of sexual lubricants from Johnson & Johnson.
Reuters last month reported that Bayer is among those interested in the consumer health business. The company’s CEO Marijn Dekkers said later that the company always takes a serious look at consumer-health opportunities, though he declined to comment on Merck’s business specifically.
Pfizer Inc. sold its infant-nutrition business to Nestle SA for $11.9 billion in 2012, and then in 2013 year spun off its animal-health unit as a separate publicly traded company called Zoetis Inc. Bristol-Myers Squibb Co. decided to become a pure-play drugmaker by spinning off its baby-formula business, Mead Johnson Nutrition Co., in 2009.