* UK consumer group seals deal after rival Bayer bows out
* Schiff board recommends $42 a share offer from Reckitt
* Reckitt enters $30 bln vitamins and supplements market
* Schiff to pay Bayer $22 mln termination fee
(Adds further comment from Reckitt CEO, valuation, detail)
By Ben Hirschler
LONDON, Nov 22 Reckitt Benckiser has
signed a deal to acquire U.S. group Schiff Nutrition for $1.4
billion, winning an entry into the $30 billion vitamins and
nutrition supplements market after beating out Germany's Bayer
The deal brings Reckitt a new portfolio including MegaRed
for heart care, Move Free for joints and Tiger's Milk nutrition
bars to add to existing over-the-counter (OTC) health products
like Gaviscon for heartburn and Strepsils for sore throats.
The OTC healthcare market is an increasingly attractive
space for consumer companies and prescription drugmakers alike,
due to its steady growth, even though the medical value of
certain products has sometimes been disputed.
Schiff's board of directors approved the previously
announced cash tender offer of $42 per share and recommended
shareholders tender into the deal, Reckitt said in a statement
late on Wednesday.
The agreement had been expected. On Tuesday, Bayer disclosed
its decision to capitulate to its rival bidder by not increasing
its own offer of $1.2 billion.
Reckitt, the British consumer products group behind Cillit
Bang cleaner and Durex condoms, which launched its tender offer
for Schiff on Nov. 16, reaffirmed that it expected the deal to
boost earnings immediately on an adjusted basis.
Underlining the appeal of non-prescription products,
Germany's BASF struck a deal on Nov. 21 to buy fish
oils maker Pronova BioPharma for $845 million to boost
its business in health supplements.
Reckitt is paying a hefty price to get into the vitamins and
supplements market. Its offer works out at 16.5 times the $85
million of earnings before interest, tax, depreciation and
amortisation (EBITDA) that Salt Lake City-based Schiff expects
to make in the year to May 2013.
That is roughly double the multiple Carlyle paid for
supplements maker NBTY two years ago, reflecting high
expectations for Schiff's products.
Schiff's stock has surged from $10 a share in January to
just over $23 before Bayer made its offer late last month. It
finished at $41.90 in New York trading on Wednesday.
HEALTH AND HYGIENE
"Schiff's portfolio is an excellent fit with our strategic
focus on health and hygiene," said Rakesh Kapoor, Reckitt's
chief executive, adding that he aimed to "realise synergies as
soon as possible".
Reckitt has a strong track record of achieving savings and
sales synergies from previous takeovers, which include the
acquisition of Boots's OTC drugs business, cough medicines
company Adams and Durex condoms group SSL.
As a result, industry analysts have generally given it the
benefit of the doubt in its move on Schiff, which is viewed as
making good strategic sense.
Shares in Reckitt, which will finance the transaction with
cash and existing credit facilities, were unchanged in early
trade on Thursday, broadly in line with the wider market.
Since Schiff had already agreed to Bayer's offer, it will
pay Bayer a $22 million fee to terminate the earlier deal.
Morgan Stanley acted as financial adviser to Reckitt, while
Houlihan Lokey advised Schiff, alongside Rothschild. Bayer was
advised by Bank of America Merrill Lynch.
(Additional reporting by Edwin Chan; Editing by Bernard Orr and