Nestle To Bid For The Consumer Health Unit Of Merck KgaA

Nestle is preparing a tentative bid for the consumer health unit of Merck KgaA in conjunction with the Stada’s private equity owners. JPMorgan, the financial adviser to Merck, has sent out a solicitation for bids of the unit whose valuation is currently around four billion euros. Some of the brands that Merck KgaA is known for include Seven Seas as well as Bion nutritional supplements.

In summer Nestle and Merck KgaA had tried a joint venture but it flopped. Cinven and Bain, intend to use the consumer health unit of Merck as Stada’s buy-and-build platform. Merck’s reason for selling the unit is to assist in the funding of research and development of prescription drugs.

Consumer healthcare

The nutritional and vitamin supplements of Nestle would fit with the ambition of the Swiss-based giant to venture into consumer healthcare which is considered a fast-growing segment by the chief executive officer of the firm, Mark Schneider. American drug giant Pfizer has also offered to sell its consumer health business to Nestle at a price of $20 billion. According to sources Merck’s consumer health unit is a better fit for Nestle since it is less diversified and smaller and more in line with the Swiss company’s core strength which is packaged food.

Nestle’s intentions to acquire the consumer health unit of Merck coincides with the food giant’s plans to close a plant located in DR Congo’s capital, Kinshasa. About 120 employees will be laid off. The food giant has announced that affected employees will be adequately compensated and the terms will be better than what local labor laws require.

“We will close our factory and offices by the end of January and continue developing our economic distribution model through third parties,” said a Nestle spokesperson.

Congo DR factory

Nestle entered the Congo DR market eight years ago when it set a factory manufacturing Maggi stock cubes. However the factory has been making losses since it started operating. Though Congo DR’s population is 80 million-plus and therefore an attractive potential market, political instability and poverty which affects approximately 80% of the people have hampered economic activities in the country. The country is also rich in minerals.

The country’s current political crisis is stemming from a decision to postpone elections to December next year, a move the opposition has objected demanding that President Joseph Kabila step down. This has led to anti-government protests aimed at pushing Kabila out after his final term ended last year in December.

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