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The sale of Merck KGaA’s consumer health unit has been thrown off track after Nestle has pulled out, leaving the race to buy the maker of Seven Seas vitamins without its main contender, sources familiar with the matter told Reuters. Nestle has walked away from the process, led by JPMorgan, after months of negotiations as the Swiss company was put off by Merck’s price expectations of about $4.99 billion, sources said. Nestle and Merck declined to comment. A spokesman for Merck said that “the process of evaluating options for our consumer health business is well on track.” Four sources familiar with the sale said that interest from other bidders, including British consumer goods giant Reckitt Benckiser, was also waning as a rival consumer health auction, led by Pfizer, was gaining momentum. Nestle was initially seen as a natural buyer for the business, which also makes Bion nutritional supplements after previous talks to set up a consumer joint venture with Merck fell through over the summer. Consumer health is a fragmented sector ranging from over-the-counter medicines and vitamins to sports nutrition products and condoms.
It has proved fertile ground for deals in recent years, as ageing population and health-conscious consumers drive demand. Nestle’s CEO Mark Schneider is a healthcare veteran and wants a deeper focus on nutrition, health and wellness. But the Swiss food group could not reach an agreement on price as Merck was targeting a valuation as high as 20 times the unit’s core earnings, said a source. Another source said mounting pressure from Third Point, which last year made a $3.5 billion investment in Nestle, also played a role in deciding against buying the Merck’s business.