Eight Firms Advise on Bayer’s $14.2 Billion Buy of Merck’s Consumer Business

In the latest large M&A deal in the pharmaceutical sector, at least eight firms are advising on the $14.2 billion sale of Merck & Co.’s consumer care business to German drug giant Bayer AG.

The transaction, announced Tuesday, will make Bayer the world’s second-largest consumer health care company should the deal close as expected in the second half of this year. Bayer won an auction for the Merck’s business. The deal will make Bayer one of the top providers of over-the-counter health products and drugs.

Bayer, which invented aspirin more than a century ago, already has a major over-the-counter division whose brands include Aleve pain reliever, Alka-Seltzer and One-A-Day vitamins. It would add Merck’s Claritin, the Coppertone sun-care line, Dr. Scholl’s foot-care products and MiraLAX laxative.

Bayer will borrow money to pay for the deal, which will bring it significant tax savings and about $200 million in savings on marketing and production costs by 2017.

David Shine, cohead of the M&A practice at Fried, Frank, Harris, Shriver & Jacobson in New York, is leading a team advising Merck that includes corporate partner Abigail Bomba, antitrust partner Peter Guryan, executive compensation partners Amy Blackman and Donald Carleen, IP and technology partner Daniel Glazer and tax partners Michael Alter and Robert Cassanos. All are in New York except Alter, who is in Washington.

“I did some research on this, and this is one of the largest carve-out transactions in history,” says Shine, a longtime legal adviser to Merck. “Carve-outs are kind of a deal lawyer’s dream. They’re among the hardest to do because it’s not like simply selling a subsidiary—you have to identify and collect all of the individual assets and liabilities being sold.”

Morgan, Lewis & Bockius is advising Whitehouse Station, N.J.–based Merck through business and finance partners Alan Leeds, David Glazer and Randall Sunberg. All are in Princeton. Sunberg coheads the firm’s life sciences transactions practice. The firm took the lead on a sidecar deal that will see Merck pay $1 billion to Bayer to codevelop and market treatments for cardiovascular diseases. New York lawyers are antitrust partner Harry Robins and associates Dov Hass and Martin d’Halluin. Other Morgan Lewis lawyers in Princeton, Washington, San Francisco and Frankfurt, Germany, are antitrust head Scott Stempel, business and finance partner Nils Rahlf and associates Michael Engel, Amanda Goceljak, Oren Livne and Benjamin Pensak.

Cleary Gottlieb Steen & Hamilton is advising Merck on European antitrust aspects of the deal. The is led by partner Romano Subiotto QC with help from associates Katia Colitti, Andrew Leyden and Vladimir Novak. All are based in Brussels.

Covington & Burling life sciences cochair John Hurvitz, special counsel Sarah Hoagland and associate James Myers are also advising Merck. All are in Washington.

Merck’s general counsel is Bruce Kuhlik.

Sullivan & Cromwell, a longtime legal adviser to Bayer, is advising the Leverkusen-based company through M&A partner Matthew Hurd in New York.

Allen & Overy is advising Bayer through banking and finance partner Neil George Weiand and associate Urs Lewens. Both are in Frankfurt, Germany.

Finally, Jones Day and German firm Gleiss Lutz are also advising Bayer.

The transaction is part of a recent surge in pharmaceutical industry deals. Some drugmakers are selling or swapping business segments to focus on areas where they have the most expertise, marketing prowess and prospects for growth, as Merck is doing. Others, like Bayer, are making acquisitions to beef up their portfolios of products or experimental drugs to boost future sales.

Fried Frank’s David Shine, speaking generally when asked what was driving all of the deal activity, says that while pent-up demand and capital have been cited as contributing factors for the merger mania, sometimes it’s the simple fact that business development managers at rival companies like deals that match those of their competitors.