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While those grow at attractive rates for consumer goods companies, they typically have far lower profit margins than the prescription pharmaceutical business.

The selloff agreement wraps up a sale process the Darmstadt-based drugmaker embarked on last September, pointing to "increasing internal constraints to fund" its consumer health business. "It is a clear demonstration of our continued commitment to actively shape our portfolio as a leading science and technology company", said Stefan Oschmann, chairman of the executive board and CEO of Merck KGaA.

"P&G's global scale and strategic interest in the health and well-being of consumers provide an excellent basis for accelerating growth, leveraging our teams' capabilities and expanding the Consumer Health business profitably".

P&G said the acquisition will enable it to expand its portfolio of consumer healthcare capabilities and brands. "With this transaction, we continue to rigorously deliver on our strategy to become a global specialty innovator and bring breakthrough medicines to patients".

The Merck unit includes vitamin brands Femibion and Neurobion. The Merck consumer healthcare brands generate almost $1 billion in annual sales and grew 6% in the past two years.

P&G's health care brands, including Vick's, Metamucil, Crest and Oral-B, already generate $7.5 billion in annual sales, about 12 percent of P&G's total revenue.

After the transaction, the Rs 1,119-crore Merck will become the fourth legal entity in India for the Cincinnati-based P&G.

"With P&G we have found a strong, highly recognised player who has the necessary scale to successfully drive the business going forward", he said.

A final agreement with P&G on Merck's French consumer health business has yet to be worked out with labour representatives but that will not change the overall price agreed with P&G.

As part of the deal, P&G will buy a majority stake in the German company's Indian consumer health business, Merck Ltd, and subsequently make a mandatory tender offer to minority shareholders. The current three companies in India that represent P&G are Procter & Gamble Hygiene And Health Care (PGHH), in which the promoter group holds about 70%, Procter & Gamble Home Products (PGHP), a wholly owned subsidiary, and Gillette India, in which it has 75% shareholding.


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