Some say it’s been coming so for long, it was almost a surprise when it finally happened: Reckitt Benckiser has finally made a bid for Durex owner SSL International. With SSL shareholders widely expected to back the deal, the condom maker could soon find itself among Reckitt’s other household names including Finish dishwasher tablets and Strepsils throat sweets. Reckitt will certainly be hoping support for the deal doesn’t Vanish. Boom boom.
As far as deals go, it’s a pretty appetising one. The bid of £2.54bn means that SSL shareholders will receive 1,163p per share, with a further entitlement to a dividend of 8p a share, which means the total is 33% more than SSL’s closing share price yesterday.
Reckitt is hoping that the deal will increase sales at its health and personal-care products unit by 36% to about £2.8bn, which means it will comprise about a third of the group’s total sales. Reckitt boss Bart Becht is also eyeing expansion in China and Japan. ‘This, combined with the good growth potential of the SSL business, makes it an attractive acquisition for Reckitt Benckiser's shareholders,’ he explained.
The not-so-good news for Benckiser and SSL employees is that cuts may well be on the horizon, as the combined company also reckons it should be able to squeeze out about £100m a year in savings. Yikes.
It’s not surprising that Benckiser has a bit of cash to flash now. It has done well out of recession by sticking to its guns and refusing to slash prices and produce cut-price ranges like many of its competitors – a strategy which has paid dividends.
SSL has held up well too and the £2.54bn offer now on the table is testament to CEO Garry Watts’ efforts in turning around the company’s fortunes. It hasn’t been an easy ride for him: soon after joining the company as FD nearly 10 years ago, he handed a dossier over to the SFO detailing an alleged £22m fraud, following a probe into overstated profits.
After being promoted to CEO he sold off loss-making parts of the business and focused solely on Durex and Scholl, bulking up the condom brand by launching a range of lubricants and sex toys and launching a series of orthopaedic insoles at Scholl.
Sounds like a marriage made in heaven to us.
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