Procter & Gamble Co. (PG) looking for health care acquisitions

Analyst: P&G bid for Merck OTC brands possible

CINCINNATI - Procter & Gamble Co. is looking for acquisitions to add to its over-the-counter drug brands, which includes Vicks cold remedies, Pepto-Bismol stomach relief and Prilosec heartburn medication, Chief Financial Officer Jon Moeller told analysts Wednesday.

“It is a space that we like,” Moeller said. “It’s certainly demographically advantaged. It’s an area that we feel we have strength in with select product treatment areas.”

Bernstein Research analyst Ali Dibadj said in a research note Thursday that P&G could acquire Merck & Co.’s OTC business, which includes Coppertone sunscreen, Claritin allergy medicine and Dr. Scholl’s foot care products.

“Although smaller acquisitions may be less risky, a large acquisition may divert management focus on growing the business organically,” Dibadj wrote.

Analyst and media reports have pegged the value of Merck’s consumer health business at $10 billion to $12 billion. Bayer AG, Novartis and Reckitt Benckiser Group PLC are among the companies said to be interested in acquiring the unit. A recent Bloomberg report identified Reckitt Benckiser as a front runner because it has fewer antitrust complications.

Moeller didn’t comment on Merck or any other potential acquisition target.

He said P&G will be “choiceful and value-driven as we pursue and evaluate those opportunities.”

Health and grooming is the smallest of four global business units that P&G operates, with $4.2 billion in net sales in its third quarter ended March 31 and net earnings of $757 million. Health care generated $2.4 billion in the period. It accounted for 11.4 percent of P&G’s net sales for the quarter and 11.1 percent of its net earnings.

P&G bolstered its OTC business in 2011 by forming a joint venture with Teva Pharmaceutical Industries Inc., a generic drug maker based in Israel. P&G has used the Geneva –based joint venture to expand its Vicks brand into Eastern Europe. In 2012, P&G added to its OTC holdings by acquiring New Chapter, a vitamin and supplements maker in Vermont.

“We are really —through the joint venture with Teva —for the first time building out our healthcare business, which is very high margin, across the globe including developing markets,” Moeller told analysts in P&G’s third-quarter earnings call Wednesday. “We've talked before about the Vicks expansion in Russia and Eastern Europe. We have some things going on in Latin America. So we will continue to, where there are smart value-creating opportunities, expand not just the paper and detergent businesses, but also the beauty and healthcare businesses.”

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