Merck KGaA Consumer Business Could Flourish In The Right Hands – Analysts
This article was originally published in The Tan Sheet
Executive Summary
Merck KGaA's weak consumer health business could be an acquisition target for a larger, more geographically diverse and innovative firm, such as Sanofi-Aventis, according to an analysts' report
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Merck KGaA's weak consumer health business could be an acquisition target for a larger, more geographically diverse and innovative firm, such as Sanofi-Aventis, according to an analysts' report. Merck's Consumer Health Care business is "structurally flawed" and would be "more valuable in the hands of a player with greater scale and/or more robust brand positions," UBS analysts led by Gbola Amusa write in a Jan. 6 report. Amusa and his colleagues value the German firm's OTC business at an estimated 2.1 billion euros ($2.8 billion under Jan. 9 conversion rates). The analysts note Merck's consumer business presents "the most interesting public asset." They identify Sanofi as a likely buyer, noting the French firm's consumer business generated 4.1 percent of its overall 2007 sales, which were $1.6 billion. Merck would be a good fit for Sanofi because of its strong dietary supplement presence in Europe, UBS adds. The analysts point out Sanofi has bolstered its supplement and vitamin position with its 2008 acquisition of Symbion Consumer, the leading supplement firm in Australia and New Zealand. Sanofi also is attempting to acquire Zentiva, which markets generics and OTCs in the Czech and Slovak republics, Russia, Poland, Turkey and other countries (1 (Also see "Sanofi’s Increased Bid For Zentiva Brings Expansion Closer" - Pink Sheet, 29 Sep, 2008.), p. 8). The analysts predict a 9 percent increase in Merck's share price performance if the firm's consumer business is sold to "a major or aspiring consumer health care player." However, the analysts say Merck "indicated that it could make opportunistic acquisitions to further expand strategically." Meanwhile, the analysts predict Merck will focus on growing its health care areas - mobility, daily health protection, women's and children's health, and cough/cold products - and on expansion in emerging markets and western countries. The analysts say other potential "bolt-on acquisition or alliance targets" include U.S.-based firms Chattem, NBTY and Pharmavite. - Katie Stevenson ([email protected]) |