UPDATE 4-Reckitt agrees to buy condom firm SSL for $3.8 bln

* Says deal will boost health and personal care unit

* SSL investors to receive 1,171 pence cash per share

* Price was a 33 pct premium to Tuesday’s bclose

* SSL shares up 33.8 pct; Reckitt up 3.4 pct

* Outside chance of counterbid

(Adds GlaxoSmithKline CEO’s comment; update shares)

By Paul Sandle

LONDON, July 21 (BestGrowthStock) – Consumer goods group Reckitt
Benckiser (RB.L: ) has agreed to buy Durex condoms and Scholl
sandals maker SSL (SSL.L: ) for 2.54 billion pounds ($3.8 billion)
to increase its presence in health and personal care.

The British maker of Nurofen painkillers and Strepsils and
Lemsip cold remedies will pay 1,171 pence per SSL International
share, representing a 33 percent premium to Tuesday’s closing
price. The price includes the 8 pence final dividend.

SSL’s shares rose just above the recommended offer as
investors speculated whether a big drugmaker, looking for growth
in the over-the-counter (OTC) sector, would offer more.

Reckitt’s health and personal care business has been a key
driver of its growth, and the premium being paid for the condom
and foot products maker underscores the value attached to key
health and consumer brands by large groups looking to diversify.

Reckitt Chief Executive Bart Becht said the deal should
increase the group’s health and personal care net revenues by
over 36 percent to around 2.8 billion pounds, one third of the
group’s total revenues.

“The acquisition will add two new Powerbrands, with good
further growth potential, to Reckitt Benckiser’s current
arsenal, making 19 Powerbrands in total,” said Becht, who was
the best-paid FTSE 100 chief executive last year.

“Durex, in the sexual wellbeing category, is the global
number one condom brand and Scholl is the market leader in the
footcare category in many of the markets where it is present.”

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For BreakingViews column click on [ID:nLDE66K0IM]

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The deal also provides a step change in the size of its
business in China, where SSL operates the world’s largest condom
factory in Qingdao, and Japan, Reckitt said, adding it saw
annual cost synergies of around 100 million pounds by the end of
2012.

SALES CHANNELS

Both companies sell products in the over-the-counter and
grocery channels to pharmacies and supermarkets, and analysts
have long seen Reckitt as a potential buyer of SSL. The group
was rumoured to have been behind an approach in 2003.

SSL’s board recommended Wednesday’s offer, which Chairman
Gerald Corbett said was four times the level of the company’s
share price five years ago.

“We felt that a price that is a 64 percent premium to the
average share price over the last 12 months, and 35 times last
year’s earnings, was worthy of consideration by our
shareholders,” he said.

He said the board had been in sole discussions with Reckitt
for a month and would not solicit other bids.

“Never say never — anything is possible — but I think
you’ll agree it’s a pretty good price,” he said.

Shares in SSL rose 33.8 percent to 1,180 pence while Reckitt
was up 3.4 percent by 1257 GMT.

“It’s a great price and I think it’s an excellent strategic
fit for Reckitt Benckiser,” said Panmure Gordon analyst Damian
McNeela.

He said another bidder was unlikely to step in as Reckitt
was in a unrivalled position to extract value from SSL by adding
its products to Reckitt’s “powerbrands”, which include Cillit
Bang cleaners and Finish dishwash products.

OTC ATTRACTION

Potential counterbidders could include Johnson & Johnson
(JNJ.N: ) and GlaxoSmithKline (GSK.L: ), which are looking to expand
their OTC businesses.

“You may get some of the big guys in pharma having a look
whether it’s worth them offering a bit more,” said analyst Chas
Manso de Zuniga at Evolution Securities. “But the current offer
is a good one.”

GlaxoSmithKline’s Chief Executive Andrew Witty, however,
played down talk of a possible bid.
“I think the way our businesses are sold and developed in
the marketplace is quite different to the way a SSL business is
sold and developed in the marketplace,” he told reporters after
publishing Q2 results on Wednesday. [ID:nLDE66J1J0]

Reckitt, which publishes half-year results on Monday, is
funding the bid through a new 1.25 billion pound facility from
HSBC (HSBA.L: ).

J.P.Morgan Cazenove [JPMBFT.UL] and Lazard (LAZ.N: ) advised
SSL, while Reckitt was advised by Deutsche Bank (DBKGn.DE: ).
($1 = 0.6534 pound).

Stock Investing
(Additional reporting by Ben Hirschler; editing by Michael
Shields and Simon Jessop)

UPDATE 4-Reckitt agrees to buy condom firm SSL for $3.8 bln