Reckitt Benckiser to pay $1.4bn for Schiff Nutrition

Rakesh Kapoor, CEO at Reckitt Benckiser Group PLC

Rakesh Kapoor, CEO at Reckitt Benckiser Group PLC

Reckitt Benckiser Group PLC, the England-based company, informed on the 22nd of November that it had signed a deal to acquire Schiff Nutrition International Inc. for $1.4 billion. The takeover of Schiff Nutrition International Inc. means that Reckitt Benckiser Group is going to enter the profitable vitamins and nutrition supplements market.

Takeover of Schiff Nutrition

As it was stated by Reckitt Benckiser Group PLC on the 21st of November, Schiff Nutrition International Inc.’s board of directors had approved the takeover offer of $42 per share and recommended it to its shareholders.

What is interesting is that the Reckitt Benckiser’s takeover offer, which valuated Schiff Nutrition International Inc. at almost 30 times EBITDA, seems to be rather a surprise for analysts. Reckitt Benckiser Group PLC decided to bid for Schiff Nutrition International Inc. The offer topped the Bayer AG’s takeover offer of roughly 1.1 billion.

The higher Reckitt Benckiser’s takeover offer for Schiff Nutrition International Inc, which is well-known producer of inter alia Move Free joint-care pills, Tiger’s Milk nutrition bars and MegaRed Omega-3 supplements, stunned Bayer AG CEO Marijn Dekkers. Bayer AG had an eye on adding vitamins and supplements to its health unit.

Reckitt Benckiser Group PLC, the producer of Cillit Bang, Nurofen,  Dettol and Durex, is to pay for the $1.4 billion takeover of Schiff Nutrition International Inc. with cash and current credit facilities. As it was underlined in a statement, the company expected the tender offer to finalize before the end of 2012.

New market, new perspectives

In October, Reckitt Benckiser Group PLC published its revenue that topped analysts’ forecasts as the company’s performance was improved by growth in sales of health-related products. Rakesh Kapoor, chief executive officer at Reckitt Benckiser Group PLC, decided to introduce new products as well as increase advertising spending to stop decreases in European markets while growing the company’s sales in emerging markets at the same time.

The takeover of Schiff Nutrition International Inc. is the latest Reckitt Benckiser’s merger in about 6 years, when the company bought Adams Respiratory Therapeutics Inc. and SSL International Plc.

Even though analysts are surprised by the company’s decision to acquire Schiff Nutrition International Inc., Reckitt Benckiser’s top executives are convinced that the takeover will increase earnings immediately on an adjusted basis. As it was underlined by them, the takeover of Schiff Nutrition International Inc. would bring Reckitt Benckiser Group PLC into the higher–margin health business, not to mention that it would also widen and diversify its US healthcare business, where it sells its products including Durex. Rakesh Kapoor, chief executive officer at Reckitt Benckiser Group PLC, has noted that the acquisition of Schiff Nutrition International Inc. consistent with the company’s policy that is aimed at the development in health and hygiene markets. He added: “We are excited to enter the $30 billion global vitamins, minerals and supplements market with such a strong portfolio of high quality branded business in the USA.”

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