Reckitt in £2.5bn deal to snap up Durex and Scholl sandal firm SSL

CONSUMER goods giant Reckitt Benckiser has agreed a £2.5 billion deal to buy SSL International, the maker of products as diverse as Durex condoms and Scholl footcare products.

Under the takeover, Reckitt will pay 1,163p per share for SSL as well as honouring the final dividend due for SSL investors.

The price represents a 33 per cent premium to SSL's closing figure on Tuesday and SSL chairman Gerald Corbett pointed out the offer was "some four times the level of the share price five years ago".

UK-Dutch group Reckitt said the takeover would provide a significant boost to its health and personal care arm, increasing the division's net revenues by 36 per cent to around 2.8bn, or one-third of the group's total sales.

But the groups warned that the integration of the two companies is expected to lead to job cuts in commercial and administration functions.

SSL, which also owns pain-relief brands such as Cuprofen and Paramol, is headquartered in London and has UK sites and manufacturing bases in Manchester, Peterlee in County Durham, Redruth in Cornwall, and Middleton.

SSL employs around 10,000 people worldwide with operations in more than 30 countries including India, Thailand and China, in addition to its UK sites.

Reckitt chief executive Bart Becht - the FTSE100's best paid director last year - said the deal should increase the group's health and personal care net revenues by more than 36 per cent to around 2.8bn, one-third of the group's total revenues.

"The acquisition will add two new 'power-brands', with good further growth potential, to Reckitt Benckiser's arsenal, making 19 power-brands in total.

"Durex, in the sexual wellbeing category, is the global number one condom brand and Scholl is the market leader in the footcare category in many of the markets where it is present."

The deal also provides a step change in the size of Reckitt's business in China, where SSL operates the world's largest condom factory in Qingdao.

Based in Slough, Reckitt employs around 24,900 staff globally and has a stable of well-known household brands, such as Dettol and Strepsils.

Both companies sell products in the over-the-counter and grocery channels to pharmacies and supermarkets, and analysts have long seen Reckitt as a potential buyer of SSL. The group was rumoured to have been behind an approach in 2003.

Corbett said the SSL board had been in sole discussions with Reckitt for a month and would not solicit other bids. "Never say never - anything is possible - but I think you'll agree it's a pretty good price.

"We felt that a price that is a 64 per cent premium to the average share price over the past 12 months, and 35 times last year's earnings, was worthy of consideration by our shareholders."

Panmure Gordon analyst Damian McNeela agreed. He added: "It's a great price and I think it's an excellent strategic fit for Reckitt Benckiser."

He said another bidder was unlikely to step in as Reckitt was in an unrivalled position to extract value from SSL by adding its products to Reckitt's brands.

Potential counterbidders could include Johnson & Johnson and GlaxoSmithKline, which are looking to expand their over the counter businesses.

Shares in SSL rose 33.5 per cent, or 295p, to 1,177p while Reckitt was up 3.5 per cent, or 110p to 3,300p.