By Georgina Prodhan and Ludwig Burger
FRANKFURT/COLOGNE (Reuters) - Germany's Merck KGaA is considering selling its $1 billion consumer health unit to meet its financial targets as a decline in its liquid crystal business forces it to review its strategy.
Industry experts have for years viewed the consumer business -- whose brands include nutritional supplements Seven Seas and Bion and decongestant Nasivin - as lacking critical scale.
Sources have said that management has informally sounded out prospective buyers on numerous occasions over the years, only to be held back by the founding family, which still owns 70 percent of Merck and favours a diversified strategy for the drugmaker.
"We expect increasing internal constraints to fund the business to reach the required scale. Fully anticipating this, we are preparing strategic options," Belen Garijo, chief executive of the healthcare business, said in a statement.
"Any possible proceeds from a potential transaction would be used to deliver on the company's overall financial targets."
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Merck has forecast roughly flat core earnings of 4.4 to 4.6 billion euros for 2017 and a slight to moderate organic increase in sales.
Shares in Merck rose as much as 2.9 percent to 94.72 euros in early trade, their highest level in nearly six weeks. By 0805 GMT they were trading 2.4 percent higher at the top of the German blue-chip DAX.
Merck said it would consider a full or partial sale of the consumer health business as well as strategic partnerships, adding that the review process was in an early stage with no final decision taken.
Merck, which traces its roots to a 17th century pharmacy, is focusing on its pharmaceuticals unit, where it is pinning growth hopes on cancer immunotherapy treatment Bavencio and multiple sclerosis pill Mavenclad after a string of setbacks.
It has also built a global biotech laboratory supplies business with takeovers of Millipore and Sigma-Aldrich in 2010 and 2016.
Merck saw liquid crystals revenue surge at the turn of the century with the advent of flat-screen LCD TVs, having failed for decades to find a commercial use for the substance.
But Chinese rivals have been chipping away at its dominant market position, leading it to spend billions on takeovers to counterbalance its dependence on the high-tech screen chemicals that still account for about 15 percent of group earnings.
($1 = 0.8400 euros)
(Reporting by Georgina Prodhan and Ludwig Burger; Editing by Maria Sheahan)