J&J Bows Out of Race for Pfizer's $20B Consumer Health Biz

Late in 2017, Pfizer indicated it was interested in selling its consumer health business. Several companies, including Johnson & Johnson, GlaxoSmithKline and Reckitt Benckiser have been interested, according to insiders. But now those same insiders say Johnson & Johnson has decided it is no longer interested.

Pfizer Consumer Healthcare has at least five major categories: dietary supplements, pain management, gastrointestinal, respiratory and personal care. Brand name products include Centrum, Caltrate, Emergen-C, Thermacare, Nexium 24 Hour, Robitussin, ChapStick and Anbesol. In 2016, 10 of the company’s brands each exceeded $100 million in sales. In 2016, the unit’s total sales hit $3.4 billion.

In an October statement, the company’s chief executive officer and chairman, Ian Read, stated, "Pfizer Consumer Healthcare is a leading player in the largest OTC categories, with iconic brands, robust retail partnerships, global reach and strong fundamentals. Although there is a strong connection between Consumer Healthcare and elements of our core biopharmaceutical businesses, it is also distinct enough from our core business that there is potential for its value to be more fully realized outside the company. By exploring strategic options, we can evaluate how best to fuel the future success and expansion of Consumer Healthcare while simultaneously unlocking potential value for our shareholders."

Most analysts believe the unit would cost around $15 billion, possibly more. The sources note that Pfizer wants to sell the unit for $20 billion or more.

Insiders are saying, as reported by Reuters, that GSK and Reckitt Benckiser are preparing bids. These non-binding offers need to be submitted before February 1.

In this case, however, it’s not clear how accurate these rumors are. Most companies are unwilling to make public statements about ongoing negotiations. However, Ernie Knewitz, J&J’s vice president of media relations, told Reuters, "While we would normally not comment on market speculation or rumors, in this instance we refute assertion that we are in negotiation for Pfizer’s consumer business."

GlaxoSmithKline has reportedly hired J.P. Morgan and Citi to work on the deal. Rickett has employed Bank of America, according to five sources reported by Reuters.

Reuters notes, "The deal could be a game-changer for rival drugmaker GSK or consumer goods group Reckitt by making them one of the biggest global players in consumer health, an increasingly lucrative sector as ageing populations and health-conscious consumers drive demand for self-medication."

In 2006, Pfizer sold its earlier consumer healthcare business to J&J for $16.6 billion. So J&J’s interest would have made sense. It’s possible that there were concerns over antitrust issues.

Another possible buyer is Nestle. The company’s chief executive officer, Mark Shneider, has a background in healthcare and has indicated he wants the company to have a larger presence in nutrition, health and wellness. It recently sold its U.S. confectionery business to Italy’s Ferrero for $2.8 billion. According to Reuters, it is looking to buy Germany company Merck KGaA’s consumer health unit.

Other companies that have been mentioned as potentially interested in Pfizer’s consumer health unit include Abbott and Procter & Gamble.

GSK already has a minority stake in its consumer health joint venture with Novartis. Novartis hints regularly it might sell its consumer health stake, but nothing has come of that to date. Analysts project that business would run about $10 billion.