Bayer to acquire Merck’s consumer health brands for $14.2 billion

TRENTON, N.J. – Germany’s Bayer plans to buy U.S.-based Merck & Co.’s consumer health business, creating a combined medicine cabinet of household names from Bayer’s aspirin to Merck’s Claritin allergy pills.

The $14.2 billion deal announced Tuesday would vault Bayer AG atop the nonprescription medicine business across North and Latin America. It would make Bayer No. 1 worldwide in skin and gastrointestinal products, a strong No. 2 in the huge cold and allergy category and No. 3 in pain relievers.

“We are combining two highly complementary businesses with virtually no overlap that will improve our product position over multiple categories,” Marijn Dekkers, Bayer’s CEO, said on a conference call with journalists.

Merck, widely considered the most research-driven U.S. pharmaceutical company, would divest a slow-growing business it inherited in 2009 when it bought Schering-Plough Corp. to get its experimental prescription medicines.

Bayer, which invented aspirin more than a century ago, already has a major over-the-counter division whose brands include Aleve pain reliever, Alka-Seltzer and One-A-Day vitamins. It would add Merck’s Claritin, the Coppertone sun-care line, Dr. Scholl’s foot-care products and MiraLAX laxative.

The transaction is part of a recent surge in pharmaceutical industry deals. Some drugmakers are selling or swapping business segments to focus on areas where they have the most expertise, marketing prowess and prospects for growth, as Merck is doing. Others, like Bayer, are making acquisitions to beef up their portfolios of products or experimental drugs to boost future sales.

Merck CEO Kenneth Frazier said in January that he was evaluating options for Merck’s consumer and animal health businesses, both units without enough scale to grow quickly. On Tuesday, Merck said it would use the sale proceeds to invest in business areas with the highest growth potential and beef up its drug pipeline with “external assets.”

The transaction, expected to close in the second half of 2014, requires regulatory approval. Bayer will borrow money to pay for the deal, which will bring it significant tax savings and about $200 million in savings on marketing and production costs by 2017.