LONDON/FRANKFURT (Reuters) – The sale of Merck KGaA’s (MRCG.DE) consumer health unit has been thrown off track after Nestle (NESN.S) has pulled out, leaving the race to buy the maker of Seven Seas vitamins without its main contender, sources familiar with the matter told Reuters.
Nestle has walked away from the process, led by JPMorgan (JPM.N), after months of negotiations as the Swiss company was put off by Merck’s price expectations of about 4 billion euros ($4.99 billion), the sources said.
Nestle and Merck declined to comment. A spokesman for Merck said that “the process of evaluating options for our consumer health business is well on track.”
Four sources familiar with the sale said that interest from other bidders, including British consumer goods giant Reckitt Benckiser (RB.L), was also waning as a rival consumer health auction, led by U.S. drug giant Pfizer (PFE.N), was gaining momentum.
Reckitt is now concentrating on buying the Pfizer unit which makes Advil painkillers, Centrum multivitamins and Chapstick lip balm and is worth about $20 billion, the sources said.
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 one of the sources.
Another source said mounting pressure from Dan Loeb’s activist fund Third Point, which last year made a $3.5 billion investment in Nestle, also played a role in deciding against buying the Merck’s business.
Loeb has repeatedly asked Nestle to move faster to overhaul its strategy. He wants the Swiss company to boost its exposure in high-growth areas such as coffee, pet care, bottled water and nutrition while selling “ill-fitting businesses” more quickly.
Schneider has so far taken positive steps including selling the U.S. confectionery business to Italy’s Ferrero for $2.8 billion but he wants to be disciplined on price, the sources said.
Famous for his sharply-worded letters to corporate chieftains, Loeb wrote on Jan. 22 that he was concerned about Nestle pushing more deeply into consumer healthcare with the purchase of Canadian vitamin maker Atrium Innovations AIII.UL and said he wants a better explanation of that move.
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