Consumer goods group Reckitt Benckiser has agreed to buy Durex condoms and Scholl sandals maker SSL for 2.54 billion pounds ($3.8 billion) to increase its presence in health and personal care. The British maker of Nurofen painkillers and Strepsils and Lemsip cold remedies will pay 1,171 pence per SSL International share, representing a 33% premium to Tuesday’s closing price. The price includes the 8 pence final dividend. SSL’s shares rose just above the recommended offer as investors speculated whether a big drugmaker, looking for growth in the over-the-counter (OTC) sector, would offer more.
Reckitt’s health and personal care business has been a key driver of its growth, and the premium being paid for the condom and foot products maker underscores the value attached to key health and consumer brands by large groups looking to diversify. Reckitt Chief Executive Bart Becht said the deal should increase the group’s health and personal care net revenues by over 36% to around 2.8 billion pounds, one third of the group’s total revenues. “The acquisition will add two new Powerbrands, with good further growth potential, to Reckitt Benckiser’s current arsenal, making 19 Powerbrands in total,” said Becht, who was the best-paid FTSE 100 chief executive last year. “Durex, in the sexual wellbeing category, is the global number one condom brand and Scholl is the market leader in the footcare category in many of the markets where it is present.”
The deal also provides a step change in the size of its business in China, where SSL operates the world’s largest condom factory in Qingdao, and Japan, Reckitt said, adding it saw annual cost synergies of around 100 million pounds by the end of 2012.
Both companies sell products in the over-thecounter and grocery channels to pharmacies and supermarkets, and analysts have long seen Reckitt as a potential buyer of SSL. The group was rumoured to have been behind an approach in 2003. SSL’s board recommended Wednesday’s offer, which Chairman Gerald Corbett said was four times the level of the company’s share price five years ago. “We felt that a price that is a 64% premium to the average share price over the last 12 months, and 35 times last year’s earnings, was worthy of consideration by our shareholders,” he said. He said the board had been in sole discussions with Reckitt for a month and would not solicit other bids. “Never say never, anything is possible. But I think you’ll agree it’s a pretty good price,” he said. Shares in SSL rose 33.8% to 1,180 pence while Reckitt was up 3.4% by 1257 GMT.
“It’s a great price and I think it’s an excellent strategic fit for Reckitt Benckiser,” said Panmure Gordon analyst Damian McNeela. —Reuters