Bayer Walks Away From Schiff After Reckitt Trumps Bid

Bayer AG (BAYN) decided not to raise its takeover offer for Schiff Nutrition International Inc. (SHF), yielding to Reckitt Benckiser Group Plc’s (RB/) $1.3 billion counterbid for the U.S. vitamin maker.

The price would have been too high, the Leverkusen, Germany-based company today in a filing with the Securities and Exchange Commission. Bayer said Oct. 30 it had agreed to buy Salt Lake City-based Schiff for about $1.1 billion, or $34 a share. Reckitt began an unsolicited tender offer for Schiff Nov. 16 at $42 a share.

Reckitt’s higher bid foiled Bayer Chief Executive Officer Marijn Dekkers’s attempt to add faster-growing vitamins and supplements to Bayer’s consumer-health unit. Schiff makes Move Free joint-care pills, Tiger’s Milk nutrition bars, MegaRed Omega-3 supplements and the Airborne cold-prevention remedy.

“This is a very good and very reasonable move,” Fabian Wenner, an analyst at Kepler Capital Markets in Zurich, said in a telephone interview today. “The higher price would have eaten a good part of the expected synergies.”

Investors, anticipating a higher bid from Bayer or another company, had pushed Schiff shares above the Reckitt offer price. The stock fell 5.2 percent to $41.86 at the close in New York. Reckitt rose 0.9 percent to close at 3,811 pence in London, while Bayer gained 1.3 percent to close at 67.25 euros.

Financial Criteria

Executives “came to the conclusion that entering a competitive bidding process would result in a price outside Bayer’s set financial criteria,” according to the filing. “Having completed a number of successful acquisitions, Bayer plans to continue its strategy to augment organic growth with strategic bolt-on acquisitions.” Bayer declined to comment beyond the filing, a spokesman said.

The offer from Slough, England-based Reckitt values Schiff at about 28 times earnings before interest, taxes, depreciation and amortization. That compares with the median of 18 times Ebitda in a survey of 13 similar deals in the past decade, data compiled by Bloomberg show.

Morgan Stanley (MS) is providing financial advice to Reckitt, while bankers at Bank of America Merrill Lynch advised Bayer. Rothschild and Houlihan Lokey advised Schiff.

Breakup Fee

Bayer’s Oct. 29 agreement with Schiff allows the U.S. company to accept an unsolicited higher offer within 30 days, provided it pays Bayer a $22 million breakup fee. Schiff Chief Executive Officer Tarang Amin would have received a $5 million bonus if the Bayer deal was completed by Dec. 31.

TPG, the Fort Worth, Texas-based buyout firm, owns about 25 percent of Schiff’s shares, according to Schiff. Chairman Eric Weider’s Weider Health & Fitness owns all of Schiff’s Class B shares, giving him more than 75 percent of the aggregate voting power, according to Schiff’s most recent annual report.

The purchase prices are based on about 31.1 million shares outstanding, including shares underlying stock options. A buyer also would assume about $122 million of net debt. Reckitt valued its offer at about $1.4 billion, while Bayer said its agreement was worth about $1.2 billion.

To contact the reporter on this story: Eva von Schaper in Munich at evonschaper@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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