The two companies entered into a definitive agreement under which Bayer AG will acquire Merck's over-the-counter business, including the global trademark and prescription rights for Claritin (anti-allergy) and Afrin (nasal spray), the company said in a statement.
"The sale of our consumer care business is part of our efforts to ensure that assets within our portfolio align with our core strategy, have industry-leading potential and generate long-term shareholder value," Merck Chairman and Chief Executive Officer Kenneth C Frazier said.
He said that by unlocking value in Merck Consumer Care, the company would be able to further its goal of being "the premier research-intensive biopharmaceutical company through targeted investments."
Bayer AG Chairman of the Board of Management Marijn Dekkers said: "The combination of Merck Consumer Care's complementary portfolio of products and geographic reach with Bayer's will create a global consumer care business better positioned to serve consumers around the world."
Merck Consumer Care is a strong business with a portfolio of well-established brands such as Claritin, Afrin and Coppertone, which are leaders in their categories, he added.
Merck said it expects to close the sale of MCC in the second half of 2014. It said the after-tax proceeds from the sale of MCC could be between USD 8 and USD 9 billion.
Both companies will collaborate in a worldwide clinical development to market and develop a class of drugs, including Bayer's Adempas, which is already approved to treat pulmonary arterial hypertension (PAH) and chronic thromboembolic pulmonary hypertension (CTEPH). It is currently marketed in the US and Europe for both PAH and CTEPH and Japan for treating CTEPH.
"The two companies will equally share costs and profits from the collaboration and implement a joint development and commercialisation strategy," it said.
Bayer will receive a USD 1 billion up-front payment with the potential for additional milestone payments upon the achievement of agreed-upon sales goals, the statement added.
The announcement is the latest in a series of consolidation moves in the global pharmaceuticals industry.
Last month, Swiss pharma major Novartis said it would acquire GlaxoSmithKline Plc's cancer drug portfolio for USD16 billion and sell its vaccines business in return for USD 7.1 billion, apart from forming a joint venture for the consumer healthcare business in a three-part transaction.
Novartis separately agreed to sell its animal health division to Lilly for about USD 5.4 billion.