Reckitt Benckiser to buy India’s Paras Pharmaceuticals
LONDON: Reckitt Benckiser Group Plc, the world's largest maker of household cleaners, agreed to buy India's Paras Pharmaceuticals Ltd. for about 32.6 billion rupees ($724 million), extending its push into consumer healthcare. Reckitt will acquire a 63 percent stake in Paras from Actis LLP, the companies said in a statement today. Sequoia Capital and the remaining Paras shareholders, including the company's founder Girish Patel and his family, will also sell their shares to the Slough, Englandbased maker of Dettol antiseptic liquid.
Paras, based in Ahmedabad in the western Indian state of Gujarat, meets Reckitt Chief Executive Officer Bart Becht's aim of expanding in health and personal care to help buffer slowergrowth in sales of household cleaners. Reckitt this year agreed to buy U.K. condom maker SSL International Plc for 2.54 billion pounds ($4 billion). Paras, the maker of Moov pain relief ointment, has annual sales of about 4 billion rupees. "All the boxes are ticked," Marco Gulpers, an analyst at ING in Amsterdam, said by phone. "Acquiring the number 1 brand in analgesics sounds like a smart move, the structure means they gain full control, the brands are pretty strong and it's in line with previous strategy." Reckitt rose 52 pence, or 1.5 percent, to 3,561 pence at 9:02 a.m. in London trading, the day's highest price. The stock has climbed 6.1 percent this year.
The maker of Veet hair remover is paying 8.1 times sales, according to Bloomberg calculations, or 30 times operating earnings before interest, taxes, depreciation and amortization. "The initial price reads a little high, but this is an emerging market where growth is substantially higher," Gulpers said. Industry standard is around 4 times sales, he said.
SSL was acquired for the equivalent of 3.1 times sales or 18 times earnings before interest, taxes, depreciation and amortization. That was Reckitt's first major purchase since the $2.3 billion takeover of Adams Respiratory Therapeutics in 2008.
Developing markets, which include India, Latin America, Africa, Middle East and Asia, account for about a fifth of Reckitt's revenue. That trails Unilever's Asia and Africa division and Procter & Gamble Co.'s developing markets, Latin America and northeast Asia units, which both account for 37 percent of group sales.
"This is not a big deal, but following on from the SSL acquisition we believe marks a fundamental shift in the Reckitt investment case," James Edwardes-Jones, an analyst at Execution Noble, said in a research report. "It's a slower growth business dependent on acquisitions which, so far, don't appear especially value accretive." He has a "sell" rating.
Paras makes BoroSoft moisturizing skin cream and Zatak deodorant. Other brands include D'Cold, the flu remedy, Dermicol for prickly heat, Krack, a cracked heel treatment, Itch Guard anti-fungal cream, and Set Wet, a hair gel and deodorant brand.
Actis stands to make more than a three-fold gain on its 2006 investment in Paras, based on a purchase price of $145 million disclosed in an Aug. 3 e-mail.
The London-based privatefirm has $4.7b of funds under management, according to today's statement. It will continue to pursue investments in India's consumer-products and manufacturing industry, and financial and business services, said JM Trivedi, an Actis partner and head of S Asia. -Bloomberg