Updated 6:12 p.m.
CINCINNATI, Ohio — Procter & Gamble announced the sale of its prescription drugs unit this morning. Already there are details, predictions and pontifications beyond the fact that Irish drug maker Warner Chilcott purchased the unit from P&G for $3.1 billion.
We’ll update this list through day’s end. But here’s the analysis of the announcement (so far).
WHY? Prescription drugs had gone from boon to burden for P&G. In the 1990s, pharmaceuticals had better returns that consumer products. But that changed LONG AGO. In February, the company announced it was working with Goldman Sachs to find a buyer.
IN OHIO. 85 percent of P&G’s 2,300 prescription pharmaceutical employees will be transferred to Warner Chilcott. About 500 of those employees work in suburban Cincinnati. Those employees will likely be able to remain in the geographic area where they work, P&G spokesman Tom Millikin said. Final details will be worked out during the transition.
SEE THE DEAL. Deallogic constructs a chart breaking down the acquisition. The deal immediately makes August the third-largest month for mergers and acquisitions in the consumer products space in the last 12 months.
A DAY FOR FINANCING? The health-care factors aside, this deal is evidence that credit markets are coming back to an even keel. Six banks will provide financing for the deal, and the acquisition is the fourth-largest leveraged loan this year. Reuters wonders: “It’s not clear how much juice the banks have to keep the momentum going if they don’t find investors for the debt.”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
SELL! SELL! SELL! Among the prescription brands the company is selling: osteoporosis drug Actonel, ulcerative colitis drug Asacol and muscle relaxant Dantrium. It’s keeping over-the-counter brands like upset stomach drug Pepto–Bismol, heartburn drug Prilosec OTC, and Vicks cold and flu products. P&G may not be done selling off parts of the company. Some other nominees to be sold, include Braun appliances, Duracell batteries, Pringles snacks.
THE UNANSWERED QUESTION: P&G wants to use this sale to increase its market size in consumer health care (it’s also acquired skin-care company The Art of Shaving). The company has about 5 percent of overall market share in that sector. How much further will they be able to penetrate the market?
THE LAST WORD: “Our shareholders don’t reward us for size, they reward us for growth. We are going to do what we have to do to get the right portfolio of businesses together that will result in the kind of growth our shareholders deserve.” — P&G President Bob McDonald during a shareholder conference call.
STOCK MARKET REACTIONS: Investors heartily approved of the deal for Warner Chilcott, pushing the company’s shares up 27 percent, or $4.35, to $20.41 on the NASDAQ Stock Market Monday. The response to P&G’s side of the deal was muted — shares of the Cincinnati consumer products company had fallen 0.45 percent, or 24 cents, to $53.34 on the New York Stock Exchange by day’s end.
