PHILADELPHIA (Reuters) – Procter & Gamble Co (PG.N) is in talks with several private equity firms, including Cerberus Capital Management LP [CBS.UL], as well as specialty drugmaker Warner Chilcott Ltd (WCRX.O) to sell its prescription drug business, a source familiar with the situation said.
The Wall Street Journal reported late Tuesday in its electronic edition that talks were “advanced” and a deal could fetch $3 billion.
The source, who declined to be named because he was not authorized to speak with the media, cautioned that the auction could take several more weeks or months.
P&G and Cerberus declined to comment. Warner Chilcott was not immediately available for comment.
“The $3 billion potential valuation is at the lower end of our range, but we are pleasantly surprised that a company would be interested in acquiring the business in the first place given its portfolio and recent performance,” Ali Dibadj, an analyst with Sanford Bernstein, said in a research report.
In December, P&G said it would end new investments in pharmaceuticals, consider divesting its healthcare brands and focus on its health business on over-the-counter products such as Pepto Bismol and Prilosec.
P&G’s prescription drugs include osteoporosis treatment Actonel and overactive bladder treatment Enablex.
In February, P&G hired Goldman Sachs (GS.N) to help sell its prescription brands or find other ways to exit the business, sources told Reuters at the time.
In April, P&G Chairman A.G. Lafley said pressure from generic products was one motivation to sell the business.
Although several private equity firms remain in the auction, Warner Chilcott may have an advantage as a bidder since it could squeeze synergies and costs savings out of the acquisition, analysts said.
“We would expect a transaction to have significant potential for cost synergies given (Warner Chilcott) existing presence in women’s health and strong focus on cost control,” said Chris Schott, an analyst with JP Morgan.
“From a product portfolio perspective, the transaction would reinforce (Warner Chilcott’s) existing significant presence in the women’s health space with the additions of a widely used osteoporosis drug in Actonel, a widely used ulcerative colitis drug in Asacol, and several other smaller products to its suite of products,” Schott said.
Procter shares fell 10 cents to $54.95 on the New York Stock Exchange. (For more M&A news and our DealZone blog, go to here) (Reporting by Jessica Hall; additional reporting by Jessica Wohl in Chicago and Megan Davies and Lewis Krauskopf in New York; editing by Jeffrey Benkoe)