Thursday, February 5, 2009

Procter and Gamble selling pharmaceutical business.

Today, a source announced Procter and Gamble is selling its pharmeceutical unit. They have hired Goldman Sachs to help with the sale. This unit of Procter and Gamble is responsible for $2 billion in sales. The sale is part of creating shareholder value for the company.

Shares of Procter and Gamble fell to a 52 week low recently after earnings were announced. I will write about those earnings soon. I just wanted to pass along this news and my take on it. Speculations will begin as to who will be bidding on the unit that includes Pepto Bismol and Prilosec.

I would say that Johnson and Johnson would be one likely suitor as they are the leader in consumer drugs. Johnson and Johnson bought the consumer drug unit from Pfizer a few years back. Recently Pfizer announced it would be buying Wyeth, which would give it more consumer drugs. Another outside pick is Chattem, the owner of Gold Bond, Icy Hot, and Flexall. The company has recently bought out of favor units from companies and turned them into market leaders. The drugs they would gain are already market leaders.

The exit is a smart move for Procter and Gamble to raise some cash. They recently sold Folgers and gained half of Smuckers as a result.


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