Reckitt acquires Schiff Nutrition
Reckitt Benckiser has signed a deal to acquire US group Schiff Nutrition for $1.4 billion (€1.1 billion), winning an entry into the $30 billion vitamins and nutrition supplements market after beating out Germany’s Bayer.
The deal gives Reckitt a new portfolio including MegaRed for heartcare, Move Free for joints and Tiger’s Milk nutrition bars to add to its existing over-the-counter (OTC) health products such as Gaviscon and Strepsils.
The OTC market is increasingly attractive for consumer companies and prescription drugmakers, 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.
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, reaffirmed that it expected the deal to boost earnings immediately on an adjusted basis.
Underlining the appeal of non-prescription products, Germany’s BASF bought fish oils maker Pronova BioPharma for $845 million on Wednesday.
Reckitt’s offer works out at 16.5 times the $85 million of earnings before interest, tax, depreciation and amortisation 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.
Reckitt has a strong track record of achieving savings and sales synergies from previous takeovers, including Boots’s OTC drug 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.