With Reckitt Benckiser out of the race, it is advantage GlaxoSmithKline Plc.
Reckitt Benckiser Group, a British consumer goods group, has withdrawn from discussions with Pfizer Inc over buying its consumer healthcare business.
According to sources familiar with the matter at hand, Reckitt exited the sale process as the U.S. drug company was expecting binding offers for the unit. The move strengthens GlaxoSmithKline Plc’s hand since it is working on an offer, said sources.
As per Reckitt, its proposal had only been for part of the Pfizer business.
As per a source familiar with the matter at hand, Reckitt had been interested in acquiring Pfizer Inc’s painkiller Advil.
As per sources, Pfizer is likely to receive more bids, which are set to end on Thursday. If Pfizer isn’t satisfied with the sale process it could decide against the sale.
Sources went on to add, the U.S. pharmaceutical giant has been hoping its consumer health business, which includes brands such as Chapstick lip balm, Advil and Centrum multivitamins, will fetch as much as $20 billion.
“An acquisition for the whole Pfizer consumer health business did not fit our acquisition criteria and an acquisition of part of the business was not possible,” said Reckitt.
Reckitt stated its priority would remain organic growth and the integration of its $16.6 billion acquisition of Mead Johnson Nutrition.
With the news reaching the market, Reckitt’s shares jumped by 5% on relief that the company would not be over-leveraging itself or considering a dilutive rights issue to fund an ambitious acquisition; shares of GSK fell by 1%.
“If indeed RB has opened the door for Pfizer CH to be acquired by GSK, it might end up significantly strengthening one of its main CH competitors,” said Bernstein analyst Andrew Wood.
Pfizer said it was reviewing the future of the consumer business following the Reckitt decision.
“Pfizer continues to evaluate potential strategic alternatives for the consumer healthcare business, which include a spin-off, sale or other transaction, and Pfizer ultimately retaining the business. We have not yet made a decision, but continue to expect to make one in 2018,” said Pfizer in a statement.
If GlaxoSmithKline was to acquire Pfizer’s consumer healthcare business, it would significantly boost its earnings, given the economies of scale the enlarged business would enjoy; however the acquisition would stretch GlaxoSmithKline’s finances, opined analysts.
“You would expect us to take a serious look at any leading and very appealing assets in the sector because we are a world leader in consumer healthcare and have a very good track record of integrating businesses successfully,” said GlaxoSmithKline’s Walmsley last month.
“We will be extremely focused on discipline around returns and frankly, this is not a need to do.”