Reckitt Shares Jump as It Passes on Pfizer Consumer Auction

(Bloomberg) -- Reckitt Benckiser Group Plc surged in early trading after it ended discussions about buying a portion of Pfizer Inc.’s consumer-health business, leaving GlaxoSmithKline Plc in pole position for the acquisition.

Reckitt shares rose as much as 6.7 percent, the most in two years, to 6,005 pence in London, while Glaxo dropped as much as 1.5 percent. Reckitt’s proposal had been for part of the Pfizer consumer-health business only, the Slough, England-based company said in a statement Wednesday, without providing further details. Reckitt and Glaxo were the only companies to have submitted nonbinding bids, people familiar with the matter said last month.

With Reckitt pulling out, Pfizer is left with dwindling options for a unit that people familiar have said could fetch $15 billion to $20 billion as a whole. The business sells popular brands such as the pain reliever Advil and the dietary supplement Centrum. French drugmaker Sanofi, Switzerland’s Nestle SA and health-care giant Johnson & Johnson were among companies to consider and then decide against bidding, people familiar with the matter have said.

“Pfizer continues to evaluate potential strategic alternatives for the Consumer Healthcare business, which include a spinoff, sale or other transaction, and Pfizer ultimately retaining the business,” the New York-based drugmaker said in a statement. Pfizer, which announced a review of the business in October, said it expects to make a decision this year.

Glaxo, based in Brentford, England, declined to comment.

Keeping It?

Pfizer could keep the business and revisit a possible sale in the future, said John Boris, an analyst with Suntrust Robinson Humphrey who advises holding the shares.

“There’s a low probability that they execute the transaction,” Boris said.

Consumer products are facing intense competition from store-brand generic alternatives and online sales from retailers like Amazon.com, the analyst said. “As a result, the brand cachet of an Advil or a Centrum is being eroded,” he said. “The margins are there but the question is, are you going to be able to grow the franchise?”

A sale would help Pfizer raise billions of dollars in cash for acquisitions and streamline operations to focus on other growth areas. The company has faced pressure to make deals since its $14 billion purchase of cancer-treatment developer Medivation Inc. in 2016, with some analysts mentioning it as a potential suitor for Bristol-Myers Squibb Co.

Pfizer shares edged down 6 cents to $36.27 in New York trading Wednesday.

To contact the reporter on this story: Jared S. Hopkins in New York at jhopkins38@bloomberg.net.

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, John J. Edwards III, John Lauerman

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