RECKITT Benckiser trumped Bayer AG’s agreed deal to buy Schiff Nutrition International with an offer of $1.4bn (£882m) for the US vitamin maker.
The bid, which tops Bayer’s $1.2bn, opens up a potential bidding war for Schiff, whose portfolio of vitamins and nutritional supplements, such as MegaRed for heart care and Move Free for joints, is attractive to companies seeking stable sources of growth.
Reckitt, the consumer products group behind Cillit Bang cleaner and Durex condoms, said it would offer $42 in cash for each Schiff share, a 23.5 per cent premium over the $34 per share that Bayer, Germany’s biggest drugmaker, agreed to pay on October 30.
Shares of Schiff Nutrition surged nearly 30 per cent to $44 in after-hours trading on the New York Stock Exchange, above Reckitt’s offer and indicating some investors expect the bidding to go higher still.
Reckitt, which has a consumer healthcare plant in Hull, commenced a tender offer yesterday and said it would expire on December 14, unless extended.
The new offer values Schiff at about 3.6 times its forecast 2013 annual sales, which is around the top end of deal multiples in the non-prescription drugs industry.
But it would get Reckitt into the $30bn global market for vitamins and supplements for the first time, complementing its existing strength in other areas of consumer health.
“When this offer was made by Bayer – which was a bilateral agreement and not a public auction process – we knew that this was an area we would be very interested in,” said Reckitt chief executive Rakesh Kapoor.
“That’s why we started to work and look at it once again to see whether this would be attractive to our shareholders. Based on our due diligence, we believe it is and that’s why we’ve come up with a strong offer.”
Analyst Andrew Wood at brokerage Bernstein said the deal made good strategic sense for Reckitt.
“This is particularly true given (Reckitt’s)... excellent M&A track record and its ability to quickly extract big synergies from acquired companies,” he said.
Its past deals in the health sector include buying Boots’ over-the-counter business in 2006 for £1.9bn, cough medicines company Adams in 2008 for $2.3bn and Durex condoms group SSL for £2.5bn in 2010.
Reckitt said it expected the deal to boost earnings immediately on an adjusted basis. A Bayer spokesman declined to comment and Schiff could not be reached.