Tuesday, December 10, 2013

Bloomberg's "Unlikeliest" RUMOR Mill -- Novartis Might Swap: Trade Its Animal Health, For Merck's Consumer Health Biz

First -- this is clearly almost nothing more than idle rumor-mongering.

Why? First of all, because such a straight asset swap raises immense (perhaps insurmountable) antitrust concerns, globally. The rumor posits that Novartis would directly swap its relatively weaker market position in Animal Health, to Merck, where Merck is likely second most dominant -- behind only the Pfizer-spinoff called Zoetis. In return for helping make Merck dominant in Animal Health -- the rumor runs -- Merck would gift Novartis the Coppertone brands, and perhaps all the rest of its Consumer Health assets (the largest chunk of which is legacy Schering-Plough), thus increasing the chances that Novartis could dominate the over-the-counter health care business markets, globally. Uh-huh. "Roger, that."

So, steering the supposed swaps-deal, through US and EU antitrust authorities alone (forgetting Australia and Japan for a moment) -- might require several years worth of structured transactions -- divestitures and joint ventures, with third parties -- to ensure meaningful and vibrant competition would emerge from the end of the swap pipe.

Yep. I think we can safely say this is one of the least credible rumors about Novartis's Animal Health businesses we have yet read. Doesn't mean some wild-eyed young MBA at an i-bank didn't suggest the deal (off the record, of course!) was possible -- to some Bloomberg reporter. . . it just means the reporter needs a little. . . perspective -- before reporting it.

Okay. Need some perspective? Do recall that the Merial Sanofi Animal Health JV series of deals of 2009 to 2010 vintage ultimately foundered on antitrust concerns. In any event, here is the Bloomberg item -- do go read it all, for entertainment value, at least:

. . . .Trading the [Novartis Animal Health] business to Merck or another company is one of several options that Basel, Switzerland-based Novartis is weighing, said the people, who asked not to be identified because the process is private. Novartis has little use for additional cash and may choose to swap the veterinary unit for an asset that would bolster the company in an area in which it is already a leader, the people said.

Merck’s over-the-counter drug business, which includes brands such as Coppertone sunblock and Claritin allergy relief medicine, is attractive to Novartis, the people said. It is not clear whether Merck would be open to such an exchange, the people said. . . .

The notion that (now twice in under four years!) Whitehouse Station would chew through several dozens of millions of dollars (in bankers' and legal fees) to structure and arrange such a convoluted series of deals, only to crater it all -- when it can't clear comepetition authorities' reviews, even remotely intact, is not obvious, to me. Of course, we will watch this, just the same. In fact, I'll pop the popcorn!

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