Consumer health care: Nestle loses interest in Merck's OTC unit 

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05 Feb 2018 --- Nestle has pulled out of the bid for Merck’s consumer health unit, leaving the race to buy the maker of Seven Seas vitamins and various other nutritional supplements without its main contender, Reuters reports. The news came a week after Johnson & Johnson withdrew from the race to buy US drugmaker Pfizer’s consumer health business, leaving Nestlé, GlaxoSmithKline and Reckitt Benckiser among the potential bidders. 

Consumer health is a fragmented sector and has proved fertile ground for deals in recent years. With products ranging from over-the-counter medicines and vitamins to sports nutrition products and condoms, consumer health is set to see continued growth as aging populations and health-conscious consumers drive demand.

Nestle has walked away from the Merck bidding process, after months of negotiations, as the Swiss company was reportedly put off by Merck’s price expectations of about 4 billion euros.

Although British consumer goods giant Reckitt Benckiser was also previously looking into acquiring Merck’s health unit, it is now reportedly concentrating on buying the Pfizer unit which makes Centrum multivitamins and Advil painkillers, among a range of other consumer brands.

Germany’s Merck announced last year its intention to sell its consumer healthcare business, which has annual sales of about US$1 billion, to help to fund more research into prescription drugs. Nestle was initially seen as a natural buyer for the business, after previous talks to set up a consumer joint venture with Merck fell through over the summer.

Nestle made a non-binding bid for the Merck’s business in November and was then shortlisted to carry out due diligence and submit a final offer this year. But the Swiss food group could not reach an agreement on price as Merck was targeting a valuation as high as 20 times the unit’s core earnings, according to Reuters sources.

Nestle’s CEO Mark Schneider has indicated his intention to pursue a deeper focus on nutrition, health and wellness. As part of this strategy, Nestlé agreed to acquire Canadian nutritional health products manufacturer Atrium Innovations in December, again supporting Nestlé’s pursuit of growth opportunities in consumer healthcare to complement the company's focus on its high-growth food and beverage categories.

However, although Pfizer’s Centrum vitamins arguably fit with Nestlé’s new strategic direction, other aspects – such as Pfizer’s Advil painkillers – are far removed from the Swiss consumer food giant's core businesses like coffee, chocolate and baby food.