Reckitt Benckiser Group Plc will offer to buy Schiff Nutrition International Inc. in a deal that values the maker of vitamins, supplements and nutrition bars at about $1.4 billion, topping a bid from Bayer AG.
The tender offer of $42 a share in cash will commence Friday, Slough, England-based Reckitt Benckiser said Thursday in a statement. The bid is 24 percent higher than Salt Lake City, Utah-based Schiff’s closing price today.
Reckitt Benckiser and Bayer are competing for Schiff’s fast-growing vitamins and nutritional supplements business, which the German drugmaker had sought to add to its consumer-health unit. Leverkusen, Germany-based Bayer AG last month agreed to buy Schiff for about $1.1 billion.
Schiff rose as much as 30 percent to $44 in extended trading, exceeding Reckitt Benckiser’s offer price. The shares rose less than 1 percent to $33.92 at the close in New York.
Reckitt Benckiser, the maker of Strepsil cold remedies and Gaviscon heartburn relief, said the purchase wouldn’t be dependent on financing because it could be funded from existing facilities. The company expects the deal would result in “significant synergies and that it would be immediately accretive to earnings on an adjusted basis.”
Reckitt Benckiser said in the statement it sees no reason why the offer can’t close before year end, “assuming prompt due diligence.”
It is prepared “to sign a merger agreement substantially similar to the one Schiff currently has with Bayer” and “looks forward to engaging with Schiff’s board and is confident that they will recognize it as a superior proposal.”
Schiff makes Move Free joint-care pills, Tiger’s Milk nutrition bars and MegaRed Omega-3 supplements. The company had sales of $258.9 million in the year ending May 31, according to data compiled by Bloomberg.
There have been almost 170 takeovers of vitamin and nutrition products companies globally in the past decade, according to data compiled by Bloomberg. Reckitt Benckiser’s offer values Schiff at about 28 times earnings before interest, taxes, depreciation and amortization. That compares with the median of 18 times Ebitda in a survey of 13 similar deals over that period, Bloomberg data show.
Reckitt Benckiser last month posted revenue that beat estimates, boosted by increased sales of health-related products and a turnaround in developed markets. Chief Executive Officer Rakesh Kapoor has introduced new products like Durex Performax Intense condoms and boosted marketing spending to stem declines in slumping European markets while lifting sales in emerging regions such as Russia.
Becky Herrick, a spokeswoman for Schiff, did not immediately return a voicemail after regular business hours.
A message left after regular business hours with Bayer’s 24-hour media service was not immediately returned.
© Copyright 2014 Bloomberg News. All rights reserved.