Tuesday, May 6, 2014

"Told Ya' So" Dept.: Merck Consumer Healthcare Businesses Sold For ~$8.4 Billion

As I have repeatedly predicted, since Merck was able to find an EU buyer for these assets, it was able to amp up the multiple a bit, to almost 4.5 times annual sales -- largely due to the foreign currency benefits an EU buyer would enjoy, over a domestic US based buyer (vis a vis the location of the bulk of the consumer health businesses). Recall that the MSM had figures well over $10 billion in the rumor mill for these assets.

Even so, at between $8 billion and $9 billion, Merck has done very well here -- getting top of market for the undersized consumer health assets. The other half of the deal value is offloading the aging pharma brands, netted against a $1 billion cash upfront return payment from Merck to Bayer -- for a collaboration on a suite of new pulmonary arterial hypertension drugs, and drug candidates. Here's a relevant bit, from Whitehouse Station:

. . . .Merck expects after-tax proceeds from the sale of MCC to be between $8 and $9 billion. The company will use the after-tax proceeds -- consistent with its capital allocation strategy -- to resource those areas within its business that represent the highest potential growth opportunities, such as MK-3475, to augment the company's pipeline with external assets that can create value and to continue to provide an industry-leading return of capital to shareholders. . . .

This also puts Merck's remodeling about two long strides ahead of Ian Read's Pfizer efforts. Mark my words, in the end -- he too will be a net seller (slasher, not buyer), even if he improbably gets control of AstraZeneca for a moment or two. He will package it up in threes, and sell two of the threes -- just as he is doing with the remaining "base" Pfizer businesses. Recall that he has already effectively shed (via gargantuan spinoff) the Zoetis animal health businesses. Word.

1 comment:

Anonymous said...

Does anyone have anyone have any idea on why Merck chose money over expanding animal health?