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Reckitt wins battle for Boots

Market analysts welcome Reckitt Benckiser's acquisition of BHI dubbing the deal as ìhard to faultî

Reckitt Benckiser has held off stiff competition from pharmaceutical multinationals to win the auction for Boots' over-the-counter medicines business with a higher than expected £1.93bn cash bid.

The deal, which will bring together Reckitt's Lemsip and Disprin cold remedies together with Boots' Nurofen painkiller, was concluded after the British group narrowly outbid Swiss company Novartis in the early hours of Friday (October 7). GlaxoSmithKline has confirmed that it was outbid in the last stage of the auction the previous day.

The final price was 22 times Boots Healthcare International's (BHI's) operating profits of £88m for the financial year to March 2005. Despite initial investor concerns that Reckitt had overpaid for BHI, analysts said the acquisition made sense.

ìStrategically the deal is hard to fault,î said Richard Workman at Oriel Securities. ìReckitt is buying good brands and has a good record on delivering on synergies.î

Reckitt chief executive, Bart Becht, said the company hopes to achieve cost-savings of £75m and £130m of net working capital gains by 2008, while the deal is expected to be earnings enhancing from the day it goes through (expected to be early next year), excluding a £150m one-off charge.

Boots was required to sell the healthcare business before it could merge with Alliance Unichem in a £7bn deal. Other pharmaceutical companies reported to have been interested in BHI were Pfizer and Bayer.

30th September 2008

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