Consumer goods company Reckitt Benckiser Group Plc (RB.L, RBGPF) said Thursday it will commence a tender offer on Friday to acquire all of the outstanding shares of vitamin maker Schiff Nutrition International, Inc. (SHF) for $42.00 per share in an all-cash deal valued at about $1.4 billion. Reckitt Benckiser noted that the transaction and tender offer can close by year-end, assuming immediate due diligence.
Following the announcement of the tender offer, Schiff shares soared more than 30 percent in after-hours trading on Thursday to $44.19, topping Reckitt Benckiser's offer price.
The offer tops the agreed deal in late October for German pharmaceutical firm Bayer AG's (BYR.L,BAYRY.PK,BAYZF.PK) unit Bayer HealthCare LLC to acquire Schiff for $34.00 per share in a deal valued at about $1.2 billion.
Salt Lake City, Utah-based Schiff Nutrition is a leading provider of branded vitamins, nutrition supplements and nutrition bars in the U.S. and internationally. Its portfolio of well known brands include MegaRed, Move Free, Airborne, Tiger's Milk, Digestive Advantage and Schiff Vitamins.
Slough, the U.K.-based Reckitt Benckiser's offer of $42.00 per share represents a premium of 23.5 percent over Bayer's offer and represents a significant 81 percent premium over Schiff's unaffected closing share price of $23.19 on October 26. It also represents a 23.8 percent premium over Schiff's closing share price of $33.92 on Thursday.
Reckitt Benckiser noted that it is prepared to sign a deal substantially similar to the one between Schiff and Bayer. It is looking to engage with Schiff's Board and is confident that they will recognize its offer as a superior proposal.
Reckitt Benckiser revealed that its tender offer will not be dependent on financing as the purchase will be funded from existing facilities.
The deal will boost Reckitt Benckiser's new strategic focus in global health and hygiene, and would provide the company with a strong product portfolio to enter the large and growing vitamin, minerals and supplements or VMS, market in the U.S. The global VMS market is valued at about $30 billion.
"We are confident that the VMS market drivers, notably changing demographics and increased awareness of the health and wellness benefits of VMS products, will provide significant long-term growth potential in what is currently a very fragmented market," Reckitt Benckiser CEO Rakesh Kapoor said in a statement.
Schiff generated net sales of $259 million for fiscal 2012 ended May 31, 2012, and sales are projected by the company to grow between 43 and 46 percent for fiscal 2013. Schiff expects to achieve net sales of about $385 million in fiscal 2013.
Reckitt Benckiser said it expects the transaction to result in significant synergies and that it would be immediately accretive to earnings on an adjusted basis.
Reckitt Benckiser shares closed Thursday's regular trading session on the LSE at 3,751.00 pence, down 19.00 pence or 0.50% on a volume of 1.06 million shares.
SHF closed Thursday's regular trading session at $33.92, up $0.01 or 0.03% on a volume of 0.20 million shares. The stock soared a further $10.08 or 29.72% in after-hours trading.
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