Updated, 12:06 p.m. | LONDON — The German drug maker Bayer said on Tuesday that it had agreed to acquire Merck’s consumer care business for $14.2 billion, a deal that will make Bayer one of the largest providers of over-the-counter products.
Bayer gains control of several well-known brand names, including Claritin, Coppertone and Dr. Scholl’s.
Bayer also entered into a co-development and commercialization agreement with Merck on Tuesday related to the treatment of cardiovascular diseases. Merck will make an upfront payment to Bayer of $1 billion as part of the agreement, to be followed by additional payments of up to $1.1 billion for achieving sales milestones.
If the consumer care businesses of the two companies had been combined last year, the revenue would have been 5.5 billion euros, or about $7.6 billion.
Bayer’s chief executive, Marijn E. Dekkers, said in a telephone interview that the company jumped at the chance to buy Merck’s consumer portfolio because Bayer was looking to enlarge its already significant consumer products line, which, in addition to Bayer aspirin, includes well-known brands like the painkiller Aleve and Flintstones vitamins. “It’s a profitable, relatively predictable and steady business with a very good cash flow,” he said. “It was a perfect match, really.”
Mr. Dekkers said he saw opportunity in global expansion of some of Merck’s most popular products in the United States — like Claritin, Afrin and Coppertone. He said about 70 percent of Merck’s consumer products sales were in the United States. “Bayer has a much more global presence, particularly in Europe and in emerging countries,” he said. “Our intention is to take some of these very good Merck brands and really aggressively promote them in other geographies.”
The purchase price of $14.2 billion includes a payment related to the sales of Claritin and Afrin in countries where those drugs are available only by prescription.
The deal is the latest in a series of blockbuster transactions this year in the pharmaceutical industry, as drug makers look to bolster their existing product lines or shed underperforming assets in noncore business lines.
Last month, the Swiss pharmaceutical giant Novartis and GlaxoSmithKline of Britain agreed to swap more than $20 billion in assets, including combining Novartis’s over-the-counter pharmaceutical business with Glaxo’s consumer drug business.
The combined Novartis-Glaxo consumer business would be a potential rival to Bayer’s over-the-counter business after the Merck transaction, with products that include Novartis’s Excedrin pain reliever and Maalox antacid, as well as Glaxo’s Aquafresh toothpaste and Nicorette gum.
Mr. Dekkers said the Bayer and Novartis-Glaxo deals highlighted a broader trend in the consumer products industry as players increasingly seek bargaining power with major drugstore chains like Walgreens and CVS. “Shelf space is important, and the bigger you are, the better you can negotiate with those people,” he said.
Other potential blockbuster pharmaceutical combinations are also on the horizon.
The hedge fund led by the activist investor William A. Ackman and the health care company Valeant Pharmaceuticals have teamed up on a $45.6 billion bid for Allergan, the maker of Botox. On Monday, Mr. Ackman urged Allergan’s board to begin discussions with Valeant.
And Pfizer, the maker of best-selling drugs like Lipitor and Viagra, continues to pursue AstraZeneca despite the rejection of an increased offer last week that valued AstraZeneca at more than $100 billion.
Bayer said it expected to record one-time costs of about $500 million related to combining the two businesses.
The transaction will be financed using a bridge loan facility provided by Bank of America Merrill Lynch, BNP Paribas and Mizuho. The facility will later be syndicated.
The deal is subject to regulatory approval and is expected to close in the second half of 2014.
Merck announced in January that it was exploring strategic options for both its consumer and animal health businesses. Morgan Stanley and the law firms Fried Frank Harris Shriver & Jacobson and Morgan, Lewis & Bockius advised Merck on the sale to Bayer. JPMorgan Chase advised Merck on its continuing portfolio assessment leading up to the transaction.
The consumer care business generates about 70 percent of its revenue in the United States and includes cold and allergy, skin care and gastrointestinal products.
Merck employs about 2,250 people in its consumer care business. The merged operation will be based in Whippany, N.J., after the transaction.
Bayer employs about 113,200 people worldwide and had revenue of €40.2 billion in 2013.
A version of this article appears in print on 05/07/2014, on page B1 of the NewYork edition with the headline: Bayer Deal To Expand Consumer Business.
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