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(Medical-NewsWire.com, November 12, 2012 ) Qld, Australia -- German company Bayer is setting up to buy U.S. vitamins maker Schiff Nutrition International for a reported $1.2 billion. The move is seen as Bayer attempting to create stable sources of growth in the more volatile and competitive prescription drug business.
Companies within the pharmaceutical industry are attempting to expand into non-prescription drugs for steadier counterweights to the prescription medicines they currently provide.
Bayer is Germany’s biggest drugmaker, and stated it was offering $34 per share in cash to the Schiff shareholders, a 47% premium of Friday’s closing price of $23.19. The deal has valued Schiff at 3.1 times the annual sales forecasted for the company.
"The deal appears consistent with Bayer's strategy, and although the premium paid appears rich at first, our reaction is it isn't outlandish," Bernstein Research analyst Jeremy Redenius said.
Aspen Pharmacare bought some of GlaxoSmithKline non-prescription drugs for around the same markup.
While Bayer expects benefits stemming from their new drugs like the stroke-prevention creation Xarelto, it has sought out and struck smaller deals to tap growth markets such as animal health and other sectors.
The group raised its full-year earnings forecast in July, which is likely partly due to a strong demand for farming pesticides. The group posted third-quarter earnings in that were in line with expectations from given the industries current position.
Bayer reported that it was given support from more than half of Schiff’s investors, which would trigger mandatory acceptance from the remaining shareholders. It will likely benefit from Schiff’s brand recognition, and the deal is set to close by the end of the year.
"The Schiff portfolio includes strong brands in three of the largest health supplement segments including joint Care (Move Free), cardiovascular health (MegaRed) and immune support (Airborne)," it said.
Marijin Dekkers, Bayer chief executive, was always considered being able to handle takeovers and brand transformation, but the Schiff deal is just the latest in what have been perhaps surprisingly smaller deals.
There have been some concerns for Bayer, as reported net income dropped to worse than expected levels, as the company had to set aside hundreds of millions for litigation regarding the Yasmin/Yaz birth control health concerns, which added a “negative touch” said Peter Spengler, a DZ bank analyst.
Bayer stated that it would agree to pay a combined $750 million to settle the over 3,000 legal claims of Yasmin causing blood clots. There are nearly 4,000 pending cases as well.
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