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The P&G-Merck KGaA Consumer Health Business Merger

Global Economic Impact of Coronavirus – Assessment and Mitigation (B)
Case Code: BSTR618
Case Length: 14 Pages
Period: -
Pub Date: 2020
Teaching Note: Available
Price: Rs.400
Organization: Procter & Gamble Company
Industry: -
Countries: United States
Themes: M&A, Divestment
Global Economic Impact of Coronavirus – Assessment and Mitigation (B)
Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Product Portfolio Restructuring at P&G

At the end of FY14, P&G reported net sales of US$74.4 billion compared to US$73.9 billion sales in FY13 and US$73.1 billion net sales in FY12. Net earnings also grew at a slower pace from US$10.8 billion in FY12 to US$11.3 in FY13 and then US$11.6 billion in FY14. Analysts opined that the cut-throat competition, slow sales growth, strengthening of the US dollar, and poor growth in the developed markets could be major reasons for the slow growth in P&G’s net sales and net profit...

A Board Seat for Nelson Peltz

In February 2017, Nelson Peltz (Peltz), a veteran American billionaire, activist investor, and one of the founding partners of Trian Fund Management, purchased a 1.5% stake in P&G for US$3.5 billion. Peltz then asked for a seat on the board of P&G, but initially the company did not agree. Peltz criticized the company for its corporate structure, poor returns to shareholders, slow growth rate, and narrow-minded culture. He criticized the company for its sluggish changes, given the rapidity with which consumer demand was changing...

A Note on Merck Kgaa

Merck, a global pharmaceutical company, was started in 1668 by Friedrich Jacob Merck in Darmstadt, Germany. The majority of the stake in the company was owned by the Merck family through E. Merck KG . The company had generated €15.3 billion in net sales in 2017, which was €303 million higher than the net sales of 2016...

Merck puts consumer health business on the Block

On September 5, 2017, Merck announced that the company was analyzing various options for its consumer health business to focus on the Biopharma segment. Merck was considering selling off the CHB partially or completely or even entering into a strategic partnership. The high margin liquid crystals business, which generated 15% of Merck’s total revenue in 2016 and had declined due to competition from Chinese companies, was one of the reasons for Merck to divert its CHB business...

Bidding Process Starts for Merck’s Chb

In November 2017, Nestlé showed an interest in buying Merck’s CHB to expand its consumer health business. Nestlé had also shown an interest in Merck’s rival Pfizer’s CHB, which was also on sale. Pfizer’s CHB was bigger than Merck’s CHB with an extensive product portfolio, and it generated revenue of US$3.4 billion in 2016...

The Deal

On April 18, 2018, P&G surprised everyone when it announced the acquisition of the whole consumer health business of Merck (CHB) in a debt-free and cash-free deal of €3.4 billion (US$4.2 billion). Belen Garijo, Head of Health Care at Merck, said..

Exhibits

Exhibit I: Details of Five Reportable Segments of P&G
Exhibit II: Selected Financial Data of Procter & Gamble
Exhibit III: Segment-wise Revenue of P&G
Exhibit IV: Selected Financial Data of Merck KGaA
Exhibit V: Various M&A Deals in OTC Segment
Exhibit VI: Merger and Acquisition Timeline of P&G
Exhibit VII: Joint Venture between P&G and Teva

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