There was a lot of anticipation surrounding Reckitt Benckiser's (RB.) first-quarter results given the possibility that the home and personal care giant would announce an exit strategy for its pharmaceutical division, which is struggling against generic competition for its opioid dependency drug, Suboxone.
As it happens, no decision was announced and all options are "still on the table". But chief executive Rakesh Kapoor did reveal that a "capital markets solution" was emerging as a "very strong option" for Reckitt Benckiser Pharmaceutical (RBP). In layman's terms, this means that RBP is highly likely to become an independent publicly listed company, which could happen either through a de-merger or an IPO. There have been a wide range of estimates valuing RBP from £1bn to £4bn. Analysts at Panmure Gordon say a disposal could be roughly 11 per cent dilutive to full-year EPS and push Reckitt's PE ratio up from 18 to 20 this financial year, a premium to most of its global peers. That said, it has been widely rumoured that Reckitt might make a multi-billion pound bid for US-based Merck's consumer health unit this year. Given that the business had sales of $1.9bn in 2013, this is a potentially huge deal for Reckitt and would be earnings-enhancing and lead to cost savings. It follows a smaller acquisition in March of the K-Y brand of sexual lubricants form Johnson & Johnson.
