Reckitt Benckiser Signs $482 Million Pact With Bristol-Myers

Reckitt Benckiser Plc, the maker of Nurofen painkillers, entered a $482 million deal with pharmaceutical maker Bristol-Myers Squibb Co. to license a number of Latin American over-the-counter healthcare remedies as it expands its presence in emerging markets.

Under the agreement, Reckitt Benckiser will license the brands for three years, with an option to purchase them at the end of the period, the Slough, England-based company said today in a statement. The brands, which include cough medicine Naldecon and painkiller Tempra, generated revenue of $102 million last year in countries including Brazil and Mexico. The deal should add to earnings by 2014, according to the statement.

“This is a quite a small deal and the multiple is yet again eye-watering at 4.7 times sales,” Eamonn Ferry, an analyst at Exane BNP Paribas, said in a note. “That said, it makes a lot of strategic sense, Reckitt can bring a lot to the table here, and it has been seeking a Latin American OTC asset for several years.”

Reckitt Benckiser gained 1.2 percent to 4,286 pence at 1:36 p.m. in London trading.

Chief Executive Officer Rakesh Kapoor is looking to expand sales in markets such as Latin America as economic conditions deteriorate in the company’s core European business, which accounts for more than 40 percent of sales. Emerging markets should generate about 50 percent of non-pharmaceutical sales by 2016, up from 42 percent in 2011, the company said last year.

Schiff Nutrition

The deal follows the $1.4 billion acquisition of Schiff Nutrition International Inc. in December, which expanded its business into vitamins and nutritional supplements. Since 2006, Reckitt Benckiser has also bought Adams Respiratory Therapeutics Inc. and Durex condom maker SSL International Plc.

“Reckitt Benckiser has been transforming itself from being principally a European household-goods company into becoming a global consumer-health company,” said Andrew Wood, an analyst at Sanford C. Bernstein in Singapore. “Today’s deal, just like the recent acquisition of Schiff Nutrition, is another step in this process.”

Bristol-Myers wanted a licensing arrangement rather than an outright sale of the brands, Reckitt Benckiser spokeswoman Andraea Dawson-Shepherd said.

“This is the structure for the agreement that BMS was offering,” Dawson-Shepherd said in an e-mail. Jennifer Mauer, a spokeswoman for Bristol-Myers Squibb, said in an e-mail that the company was “pleased with this collaboration structure.”

The deal “creates a material consumer-healthcare platform, infrastructure and distribution network for RB in both Brazil and Mexico,” Kapoor said in the statement. “It is an important step in building our consumer healthcare presence in Latin American emerging markets.”

New York-based Bristol-Myers Squibb, the maker of anti-stroke medication Plavix, will supply the products during the so-called collaboration period, said Reckitt Benckiser, which is due to report full-year results tomorrow.

(Updates with analyst comment in third paragraph.)
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