Reckitt Benckiser to buy In­dia’s Paras Phar­ma­ceu­ti­cals

The Pak Banker - - Company& -

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

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