LONDON: Reckitt Benckiser Plc has won the bid finally. It is buying Boots Group’s non-prescription drugs business, Boots Healthcare International (BHI), for 1.9 billion pounds in cash. There will be synergies of sort, when the company’s Lemsip and Disprin cold remedies will be placed alongside of Boot’s Nurofen painkiller.
Boots, which is in the process of merging with Alliance Unichem Plc, is required to divest the healthcare business for the merger to secure the regulator’s approval. It is returning around 1.43 billion pounds to its shareholders through a special dividend.
Reckitt Benckiser’s chief executive Bart Becht admitted the price was a full price, but there are considerable synergies and the company is acquiring a high growth and high margin business with earning enhancing from year one. The company hopes to have cost savings of 75 million pounds and 130 million pounds of net working capital gains by 2008.
Becht said he is paying around 20 times earnings before interest, tax, depreciation and amortization (EBITDA) against recent similar deals which were priced at about 13 or 14 times, but contended that the Boots business had important brands and strong growth potential.
Apart from Nurofen, Reckitt Benckiser will add Clearasil skin products and Strepsils throat lozenges to its health and personal care division, which already has an array like Dettol antiseptic, Veet depilatories and heartburn treatment Gaviscon. The company is committed to continue operations at BHI’s three sites in Nottingham, England and in Germany and Thailand.
Reckitt Benckiser, the world’s largest consumer and household cleaning products group, which had been scouting for acquisitions since 1999, had lost two earlier chances — to buy Bayer’s household insecticide unit and Schick razors — mainly because of cautious bidding. In its bid for BHI, it was pitted against GlaxoSmithKline Plc.
The path is now clear for Boots to buy Alliance Unichem to create drug retailing major with pan-European footprint.