Reckitt Benckiser’s feelings about Pfizer’s consumer unit haven’t changed since the company said in 2015 that it’d be keen to buy it. But its resources have.
The household goods company, in debt after its £13.2 billion buy of baby food maker Mead Johnson, will review all its financing options when Pfizer starts taking bidders on the unit, the U.K.’s Sunday Times reports.
Those could include a multibillion-pound rights issue, an asset swap or the purchase of individual assets from Pfizer’s portfolio, the newspaper’s sources say.
Pfizer officially confirmed earlier this month that it was weighing options for its OTC division, and the timing isn’t great for Reckitt. The company has slid since the Mead Johnson buy, suffering a sales slowdown, a cyberattack and four exec-committee exits. Plus, after its last big buy, the company could have trouble drumming up shareholder support for another big deal, Jefferies analysts have warned, pointing out in a note seen by The Times that a buy would take Reckitt’s net debt to more than four times its earnings.
RB, though, has had its eye on Pfizer’s OTC stable for quite some time; nearly two years ago, CEO Rakesh Kapoor told Bloomberg he’d be “very interested” in snapping it up. A deal between the two would bring well-known brands like Advil, ChapStick and Centrum to a Reckitt lineup that already includes Nurofen painkillers and Durex condoms.
“We think [Reckitt’s] best hope is that the Pfizer review plays long. This would give them the opportunity to sort out [Mead Johnson] and hopefully rebuild market confidence,” Jefferies’ analysts wrote.
If and when the auction comes around, though, Reckitt might find itself up against some hefty competition—though pharma’s consumer health enthusiasm seems to have cooled somewhat since the company pulled out of a two-horse race with Bayer over Merck’s OTC unit. Instead, it could wind up facing off against food behemoth Nestlé, which has said it’s scouting OTC drugs.