Reckitt clinches deal to buy Schiff for $1.4 billion
By Ben Hirschler | November 22, 2012 7:56 PM EST
The deal brings Reckitt a new portfolio including MegaRed for heart care, Move Free for joints and Tiger's Milk nutrition bars to add to existing over-the-counter (OTC) health products like Gaviscon for heartburn and Strepsils for sore throats.
The OTC healthcare market is an increasingly attractive space for consumer companies and prescription drugmakers alike, due to its steady growth, even though the medical value of certain products has sometimes been disputed.
Schiff's board of directors approved the previously announced cash tender offer of $42 per share and recommended shareholders tender into the deal, Reckitt said in a statement late on Wednesday.
The agreement had been expected. On Tuesday, Bayer disclosed its decision to capitulate to its rival bidder by not increasing its own offer of $1.2 billion.
Reckitt, the British consumer products group behind Cillit Bang cleaner and Durex condoms, which launched its tender offer for Schiff on November 16, reaffirmed that it expected the deal to boost earnings immediately on an adjusted basis.
Underlining the appeal of non-prescription products, Germany's BASF
Reckitt is paying a hefty price to get into the vitamins and supplements market. Its offer works out at 16.5 times the $85 million of earnings before interest, tax, depreciation and amortisation (EBITDA) that Salt Lake City-based Schiff expects to make in the year to May 2013.
That is roughly double the multiple Carlyle paid for supplements maker NBTY two years ago, reflecting high expectations for Schiff's products.
Schiff's stock has surged from $10 a share in January to just over $23 before Bayer made its offer late last month. It finished at $41.90 in New York trading on Wednesday.
HEALTH AND HYGIENE
"Schiff's portfolio is an excellent fit with our strategic focus on health and hygiene," said Rakesh Kapoor, Reckitt's chief executive, adding that he aimed to "realise synergies as soon as possible".
Reckitt has a strong track record of achieving savings and sales synergies from previous takeovers, which include the acquisition of Boots's OTC drugs business, cough medicines company Adams and Durex condoms group SSL.
As a result, industry analysts have generally given it the benefit of the doubt in its move on Schiff, which is viewed as making good strategic sense.
Shares in Reckitt, which will finance the transaction with cash and existing credit facilities, were unchanged in early trade on Thursday, broadly in line with the wider market.
Since Schiff had already agreed to Bayer's offer, it will pay Bayer a $22 million fee to terminate the earlier deal.
(Additional reporting by Edwin Chan; Editing by Bernard Orr and Tom Pfeiffer)
Most Popular Slideshows
- Gennady Golovkin Next Fight Options: Canelo Alvarez, Miguel Cotto Or Julio Cesar Chavez Jr.
- NFL MNF: Pittsburgh Steelers 30, Houston Texans 23 [PHOTOS]
- 2014 MLB World Series Game 1: San Francisco Giants 7, Kansas City Royals 1 [PHOTOS]
- 2014 MLB World Series - Game 2: Kansas City Royals 7, San Francisco Giants 2 [PHOTOS]
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- Virginia Woman Who Posted Naked Image Of Ex-BF’s New Partner 1st Person Charged Under Revenge Porn Law
- No Mercy: ISIS, Father Stones to Death Daughter for Alleged Adultery
- iOS 8 Jailbreak Release Date is Doomed as Team Evad3rs Opts Out, Pangu Hits Snag – Report
- Google Nexus 6 vs. iPhone 5S: 4 Important Things to Consider Before Switching to Android Lollipop
- Swedish Military Spots ‘Russian Submarine’ Off Stockholm Coast, An Alarming ‘Security Game Changer’
- Canada Raises National Terror Alert Level after Suspected Jihadist Runs Over Soldier
- Galaxy Note 4: Best Big-Screen Phone, Says Samsung; Analysts Believe Note 4 Unlikely To Beat iPhone 6 Plus [Watch Video]