Nestle SA (ADR) (OTCMKTS: NSRGY) On High Ground In Bid For Merck KGaA’s Consumer Unit


Nestle SA (ADR) (OTCMKTS: NSRGY) is reportedly making good progress getting ahead of the competition in the bid for Merck KGaA’s consumer health unit.

An anonymous source told Bloomberg that Nestle which is the largest food company in the world has submitted a bid to acquire the consumer health unit. The source also revealed that the German firm will most likely announce the firm that will win the bid during Q1 and that Nestle might be selected since it is currently the highest bidder. However, Merck might also choose not to sell the unit.

“Merck is seeking to divest the unit, which markets vitamins and food supplements, and instead focus resources on its pharmaceuticals business,” stated Bloomberg.

Merck stated that it will not have enough resources to boost the consumer health division or even carry out tests for new drugs such as cancer drug Bavencio. It has been speculated that the sale of the unit might raise as much as $4 billion or $5 billion but so far no deal has been announced. The negotiations have so far remained private and a Nestle spokeswoman stated that she would not comment on rumors. The German biopharma will use the funds from the sale to ease its debt burden.

The consumer health division currently consists of some over-the-counter drugs such as Neurobion which is a compound of nutritional supplements from the Seven Seas brand as well as vitamin Bs. The division managed to generate $1.03 billion in revenue in 2016. Some of the other companies that are currently pursuing the acquisition include Mylan NV (NASDAQ: MYL), and Reckitt Benckiser Group Plc-ADR (OTCMKTS: RBGLY). Some other suitors such as German drugmakerStada and Perrigo Company PLC (NYSE: PRGO) have dropped out of the race.

Nestle is a strong contender in the race and Mark Schneider who is the current chief executive has been working on expanding its health business. If it manages to secure the deal, it will mark Nestle’s second acquisition following a previous deal through which it acquired Atrium Innovations, a Canadian supplements manufacturer for $2.3 billion in December last year.

Nestle stock closed the latest trading session on Thursday at $84.52 after tanking by 0.65 percent from the previous close.


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