(Adds more comments from Reckitt Benckiser CEO Bart Becht)
LONDON (AFX) - Boots Group PLC, the health and beauty retailer that on Monday revealed a proposed merger with Alliance UniChem PLC, has agreed the sale of its Boots Healthcare International (BHI) over-the-counter medicines business to Reckitt Benckiser PLC, the Anglo-Dutch household products group, for a much better-than-expected 1.926 bln stg.
Boots plans to return 1.43 bln stg of the proceeds to shareholders through a special dividend, equivalent to about 200 pence per share. The special dividend will be accompanied by a consolidation of Boots' ordinary share capital.
The remaining 400 mln stg of proceeds will be retained for future investment in the merged group.
Boots' 7 bln stg "merger of equals" with Alliance UniChem to create an international pharmacy-led healthcare giant called Alliance Boots is conditional on the sale of BHI.
Analysts had not expected BHI, put up for sale in April, to go for more than 1.7 bln stg.
Reckitt, which beat off competition for the unit from GlaxoSmithKline PLC, Germany's Bayer AG and Swiss group Novartis AG, will add BHI's three "power brands" of Nurofen, Strepsils and Clearasil to its stable, which includes Lemsip and Disprin.
"BHI will substantially strengthen Reckitt Benckiser's global position in bothhealth care and personal care," said Bart Becht, the group's chief executive officer.
He noted combined health and personal care revenues will exceed 1 bln stg,an increase of 90 pct and will represent 26 pct of the enlarged group.
Reckitt Benckiser is targeting 75 mln stg in cost synergies and 130 mln stg in net working capital synergies by 2008.
"The prospect that the deal is targeted to be immediately earnings enhancing (excluding 150 mln stg of one-off restructuring costs) combined with the growth potential and attractive margin profile makes this a good acquisition for shareholders," said Becht.
Talking to reporters he said the group had been considering BHI as a potential acquisition target for over 10 years and defended the price paid to secure it.
"What we're paying for here is a top quality portfolio, that's why the multiples are somewhat ahead," he said, noting that Reckitt Benckiser is paying 3.6 times sales and 20 times EBITDA (earnings before interest, taxation, depreciation and amortisation) compared to sales and EBITDA multiples of 2.5-3 and about 14 respectively on comparable deals in the sector.
The BHI disposal is conditional on clearance from the European and US anti-trust authorities and the approval of Boots shareholders at an extraordinary general meeting.
It is expected to close in early 2006 with the payment of the special dividend shortly after.
"Together with the announcement of the proposed merger with Alliance UniChem, this disposal allows us to focus on our plans to create a world class pharmacy-led healthcare group," said Boots CEO Richard Baker.
At 9.23 am shares in Boots were up 6 pence at 628-1/4 pence, shares in Reckitt Benckiser were up 50 pence at 1,758-1/2.
jdd/ak
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LONDON (AFX) - Boots Group PLC, the health and beauty retailer that on Monday revealed a proposed merger with Alliance UniChem PLC, has agreed the sale of its Boots Healthcare International (BHI) over-the-counter medicines business to Reckitt Benckiser PLC, the Anglo-Dutch household products group, for a much better-than-expected 1.926 bln stg.
Boots plans to return 1.43 bln stg of the proceeds to shareholders through a special dividend, equivalent to about 200 pence per share. The special dividend will be accompanied by a consolidation of Boots' ordinary share capital.
The remaining 400 mln stg of proceeds will be retained for future investment in the merged group.
Boots' 7 bln stg "merger of equals" with Alliance UniChem to create an international pharmacy-led healthcare giant called Alliance Boots is conditional on the sale of BHI.
Analysts had not expected BHI, put up for sale in April, to go for more than 1.7 bln stg.
Reckitt, which beat off competition for the unit from GlaxoSmithKline PLC, Germany's Bayer AG and Swiss group Novartis AG, will add BHI's three "power brands" of Nurofen, Strepsils and Clearasil to its stable, which includes Lemsip and Disprin.
"BHI will substantially strengthen Reckitt Benckiser's global position in bothhealth care and personal care," said Bart Becht, the group's chief executive officer.
He noted combined health and personal care revenues will exceed 1 bln stg,an increase of 90 pct and will represent 26 pct of the enlarged group.
Reckitt Benckiser is targeting 75 mln stg in cost synergies and 130 mln stg in net working capital synergies by 2008.
"The prospect that the deal is targeted to be immediately earnings enhancing (excluding 150 mln stg of one-off restructuring costs) combined with the growth potential and attractive margin profile makes this a good acquisition for shareholders," said Becht.
Talking to reporters he said the group had been considering BHI as a potential acquisition target for over 10 years and defended the price paid to secure it.
"What we're paying for here is a top quality portfolio, that's why the multiples are somewhat ahead," he said, noting that Reckitt Benckiser is paying 3.6 times sales and 20 times EBITDA (earnings before interest, taxation, depreciation and amortisation) compared to sales and EBITDA multiples of 2.5-3 and about 14 respectively on comparable deals in the sector.
The BHI disposal is conditional on clearance from the European and US anti-trust authorities and the approval of Boots shareholders at an extraordinary general meeting.
It is expected to close in early 2006 with the payment of the special dividend shortly after.
"Together with the announcement of the proposed merger with Alliance UniChem, this disposal allows us to focus on our plans to create a world class pharmacy-led healthcare group," said Boots CEO Richard Baker.
At 9.23 am shares in Boots were up 6 pence at 628-1/4 pence, shares in Reckitt Benckiser were up 50 pence at 1,758-1/2.
jdd/ak
COPYRIGHT
Copyright AFX News Limited 2005. All rights reserved.
The copying, republication or redistribution of AFX News content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
AFX News and the AFX Financial News logo are registered trademarks of AFX News Limited
For more information and to contact AFX: www.afxnews.com and www.afxpress.com
© 2005 AFX News
