Reckitt Benckiser Group Plc (RB/) agreed to acquire Schiff Nutrition International Inc. (SHF) in a transaction valuing the dietary supplements maker at about $1.4 billion, topping an earlier bid from Bayer AG. (BAYN)
Schiff’s board approved the offer of $42 a share in cash and will recommend its investors tender their shares, the Slough, England-based company said in a statement yesterday. When the offer was announced on Nov. 15, it valued Schiff at about 28 times earnings before interest, taxes, depreciation and amortization and represented an 81 percent premium to Schiff’s share price on Oct. 26, before Bayer’s offer.
Reckitt Benckiser’s counterbid for Salt Lake City-based Schiff, the maker of Move Free joint-care pills, Tiger’s Milk nutrition bars and MegaRed Omega-3 supplements, exceeded Bayer’s offer of about $1.1 billion. The higher bid foiled Bayer Chief Executive Officer Marijn Dekkers’s attempt to add faster-growing vitamins and supplements to Bayer’s consumer-health unit.
The maker of products ranging from Durex Performax Intense condoms to Strepsil cold remedies and Gaviscon heartburn relief, has said buying Schiff will result in “significant synergies,” with the deal being “immediately accretive to earnings on an adjusted basis.”
Reckitt Benckiser last month posted revenue that beat estimates, boosted by increased sales of health-related products and a turnaround in developed markets. CEO Rakesh Kapoor has introduced new products and boosted marketing spending to stem declines in slumping European markets while lifting sales in emerging regions.
The purchase of Schiff will follow a string of acquisitions since 2006, including Adams Respiratory Therapeutics Inc. and SSL International Plc, the maker of Scholl foot products.
“We are very pleased to have reached a mutually beneficial agreement with Schiff and are excited to enter the $30 billion global vitamins, minerals and supplements market with such a strong portfolio of high quality branded business in the USA,” Kapoor said in the statement yesterday. “Schiff’s portfolio is an excellent fit with our strategic focus on health and hygiene.”
Reckitt Benckiser will finance the purchase with cash and current credit facilities and said it expects the tender offer to close before the end of the year.
Bayer, based in Leverkusen, Germany, agreed on Oct. 30 to buy Schiff for $34 a share. Reckitt Benckiser began an unsolicited tender offer for Schiff on Nov. 16. and on Nov. 20 Bayer said it wouldn’t raise its bid for Schiff because the price would have been too high.
Reckitt Benckiser’s offer valued Schiff at about 28 times Ebitda. That compared 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 is providing financial advice to Reckitt Benckiser, while bankers at Bank of America Merrill Lynch advised Bayer. Rothschild and Houlihan Lokey advised Schiff.
Bayer’s agreement with Schiff allowed the U.S. company to accept an unsolicited higher offer within 30 days, provided it pays Bayer a $22 million breakup fee.
Schiff rose 0.1 percent to $41.90 at the close in New York yesterday.
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