Friday, January 31, 2014

Reuters Is "Resurfacing, And Retreading" The Rumor Pieces -- About Merck's AH & OTC Businesses

And just as I said in December 2013, and more forcefully early this month, any Novartis swap deal is listed as a low-probability.

However, Reuters pins that low probability on complexities of valuation. That is simply silly. In every deal -- of any size, the central question is. . . you guessed it: valuation. Said another way, the valuation problem is no more complex in a swap -- than in a levered sale (both sides need to argue until they agree -- or until the bankers say they won't finance it -- on those proffered terms). And yet, Reuters suggests an outright sale gets around the valuation "problem". Silly.

No, what that tells me, by inference, is that bankers for Novartis (and significantly less probably, for Merck) are being. . . coy with the background/off- the-record comments for the story. . . They can safely say it is "complexities" -- but they dare not say it is antitrust driven complexity. So they say "valuation complexity" -- and the largely feckless reporter laps it up, and repeats it -- verbatim, in the final copy. There will be far fewer likely predators circling, if a real antitrust concern is surfaced -- that I've seen, over and over again.

In any event, here is the Reuters story -- with my truth-enhancing edits, inserted -- but do go read it all, as originally written, of course -- to see what I mean:

. . . .Among a range of options it has considered for the consumer unit, Merck discussed a potential asset swap with Novartis AG (NOVN.VX), under which Merck would give up its consumer assets in return for the Swiss drugmaker's animal health and other units, Reuters and others previously reported.

The probability of carrying out such a deal, however, is currently seen as low. . . [Ed. Insert: due to complexity of shedding assets, to satisfy the antitrust laws, and thus] prompting Merck to explore an outright sale of its consumer unit as well, people familiar with the matter said. . . .

So it goes -- and I'll repeat my conjecture from this morning that there is not likely to be any announcement of any major deal, next Wednesday.

Now, please root along, to let my Denver team win on Sunday. Bring on the high altitude good ju ju! [And, on that topic, I think it was Bill Maur who wryly noted that this year's big game features the only combination possible, like this -- of two teams with lawful cannabis, state-wide (and it's actually on-topic, because this is. . . a drugs blog, of sorts!). . . . Should be a very mellow affair, then. And I hear there will be lots of chips and salsa, available, post game, in both locker rooms.]

1 comment:

Anonymous said...

...from the Reuters article, the only new and important things are the names: RB and P&G.

Novartis cannot / does not want to swap not only because of "antitrust issues", but because of type of assets Merck is offering.

Novartis does not need Coppertone or Dr. Scholls.....sold mainly here (in the US), however representing a quarter of the all creates "complexities" in valuation as well.

RB is a much better suitor... that is why the name is important

....or it will be sold in pieces...