INSUBCONTINENT EXCLUSIVE:
PG is the make of Pampers diapers and Gillette razors
Procter Gamble Co (PG) has agreed to acquire Merck KGaA's consumer health unit for 3.4 billion euros ($4.2
billion), giving it vitamin brands such as Seven Seas and greater exposure to Latin American and Asian markets
The maker of Pampers diapers and Gillette razors said the deal would help it expand its portfolio of consumer healthcare products which
includes Vicks cold relief.The Merck unit includes vitamin brands Femibion and Neurobion.The deal follows GlaxoSmithKline agreeing to buy
Novartis out of their consumer healthcare joint venture for $13 billion after dropping its pursuit of Pfizer's consumer unit.Pfizer has
struggled to divest the business for as much as $20 billion, after Reckitt Benckiser dropped out last month and Johnson Johnson stepped
away in January.Prescription-free remedies offer stable sales due to customers' brand loyalty, albeit at lower margins than
pharmaceuticals.But intense price competition online, mainly from Amazon, as well as cheaper store-brand products have weighed on profits in
and other Western markets.U.S.-based PG derived 12 percent of group sales, or $7.5 billion, from health care products last year, including
Oral-B toothbrushes and toothpastes.The purchase price for Merck's business suggests that the German company climbed down from price demands
of as much as 4 billion euros, which sources told Reuters had deterred initial suitors such as Nestle, Perrigo and Stada owners Bain and
Cinven.Morgan Stanley analyst Vincent Meunier said the price still implied a valuation of 4.7 times sales and around 19 times operating
profit (EBITDA) for the business, at the high end of recent deals in the sector."This will help (Merck) focus on its pharma unit and
refurbish its pipeline," he said.Merck shares were up 0.5 percent higher at 0833 GMT, among top gainers in the German blue-chip DAX index,
having risen 1.2 percent earlier.Merck said that it fetched a multiple of about 19.5, above recent industry transactions and based on an
adjusted "economically transferred" EBITDA of 173 million euros in 2017.The proceeds would allow it to reduce debt faster, giving its
businesses, which include chemicals, pharmaceuticals and lab equipment, more flexibility, although it ruled out acquisitions worth more than
500 million euros this year.PG also announced it will split up its consumer care joint venture with Teva, PGT Healthcare, on July 1, saying
strategies were no longer aligned.PGT accounts for nearly all of PG's personal health care sales outside of the United States.Teva said the
terms of the agreement to terminate the JV with PG would not be disclosed and that the dissolution was amicable.Merck said the divestment of
its consumer health business did not change its goal of keeping net sales of its established prescription drugs, such as Erbitux against
cancer and multiple sclerosis treatment Rebif, organically stable until 2022.It will issue guidance for 2018 to reflect the sale of the
consumer healthcare business with it publishes first-quarter financial results on May 15, it said.INDIA BUSINESSAbout 3,300 Merck employees
could move to PG upon completion of the transaction, which is expected by the fourth quarter.As part of the deal, PG will buy a majority
stake in the German company's Indian consumer health business, Merck Ltd, and subsequently make a mandatory tender offer to minority
shareholders.A final agreement with PG on Merck's French consumer health business has yet to be worked out with labour representatives but
that will not change the overall price agreed with PG.JP Morgan acted as financial adviser to Merck on the transaction, and Freshfields
