Speculation over Reckitt Benckiser buy likely to rest on anti-trust laws

By Simon Pitman

- Last updated on GMT

Related tags: Reckitt benckiser, Mergers and acquisitions, European union

With the imminent departure of Reckitt Benckiser CEO Bart Becht, speculation is growing over a merger or acquisition bid. But a leading financial analyst believes anti-trust laws may throw a spanner in the works.

With a new head at the helm, the company is more likely to be the target of either a merger with Colgate-Palmolive, or the subject of an acquisition by major players such as P&G or Unilever.

Financial analyst Andrew Wood, of New York-based Sanford C Bernstein, says that there is no concrete evidence that any of the big players will be lining up for bids, but believes that at this early stage one of the biggest considerations will be regulatory and anti-trust laws.

“Our deep-dive research on potential anti-trust issues indicates that Unilever, and especially, Colgate would have relatively minor issues with an acquisition of, or merger with Reckitt Benckiser,”​ said Wood.

Anti-trust and regulatory issues

However, the analyst’s research concludes that for the world’s biggest consumer goods player, P&G, the anti-trust and regulatory issues might prove to be too much of a serious contender in the bidding process.

"P&G would have significant issues in too many countries and in too many categories, especially in the EU, which would probably preclude a deal," ​Wood said.

P&G grew significantly in the 1990s and the early part of the new millennium, making a significant leap in 2005 when it bought the Gillette business, an acquisition that saw the company expand into oral care and men’s grooming, limiting its potential to make big M&A moves.

Cross-over categories and countries

As part of its research Sanford Bernstein considered UK-based Reckitt Benckiser’s 20 primary markets, which include nine in the EU, as well as 500 country/category combinations to determine where there might be troublesome cross-over with potenial buyers.

The analysis determined that P&G has significant anti-trust issues, specifically home care and depilatory in Europe, making an estimated 44 per cent of Reckitt Benckiser’s total sales potentially questionable and likely to block a deal.

Unilever was considered to have potential issues in specific areas, again in the home care arena and in the South Africa and India markets, but the researchers believe that this will not be enough to preclude it from making a successful bid.

Colgate looks like a good bet

Meanwhile Colgate was determined to be the least problematic potential bidder, with surface care and the markets of Greece and Australia being the only areas for potential issues, but equally these could be remedied.

To conclude, Wood states his belief that P&G’s chances of a successful acquisition bid are ‘slim’, while Unilever could well pursue the acquisition process, despite still being in turnaround mode.

On the other hand, he also states that while anti-trust laws should not prove to be a major obstacle for Colgate-Palmolive, the expected £40m price tag for the business is probably too much, making it a more likely candidate for a merger process.

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