Reckitt Benckiser to commence tender offer for Schiff Nutrition

The $1.4 billion deal represents a 23.5-percent increase over the merger agreement offer put forth by Bayer HealthCare LLC

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SLOUGH, England—Reckitt Benckiser Group PLC has announcedplans to commence a tender offer on Nov. 16 to acquire all outstanding sharesof common stock in Schiff Nutrition International, Inc. for $42 per share incash, a deal that values the company at approximately $1.4 billion total.
The offer comes a little over two weeks after BayerHealthCare LLC announced, on Oct. 30, that it had signed a merger agreementwith Schiff under which it would acquire the Salt Lake City-based company for$34 per share in cash, for an approximate total of $1.2 billion. Thetransaction is expected to close by the end of the year.
Reckitt Benckiser's offer represents a 23.5-percent premiumover Bayer HealthCare's offer, and Reckitt Benckiser noted that it "isconfident that it can close the tender offer before the end of calendar year2012, provided it is permitted in short order to complete limited confirmatorydue diligence." 
"For Reckitt Benckiser, this acquisition would provide apowerful entryway into the large and rapidly growing $30 billion global VMSmarket. This market would be the largest consumer health care sector in whichwe operate," Rakesh Kapoor, CEO of Reckitt Benckiser, said in a press release."It is an ideal addition to Reckitt Benckiser's new strategic focus in globalhealth and hygiene, and would give us immediate scale in VMS in the U.S.A.  It also plays well to our consumermarketing, innovation and go-to market capabilities. We are confident that theVMS market drivers, notably changing demographics and increased awareness ofthe health and wellness benefits of VMS products, will provide significantlong-term growth potential in what is currently a very fragmented market."
Schiff "develops, manufactures, market, distributes andsells vitamins, nutritional supplements and sports nutrition products" withinthe joint care, cardiovascular health and immune support health supplementindustries. The company has roughly 400 employees, with headquarters and itsmanufacturing site located in Salt Lake City, as well as additional offices inEmeryville, Calif. Schiff's product portfolio includes brands such as MoveFree, Tiger's Milk, Airborne, Digestive Advantage, Sustenex and MegaRed.
For its fiscal year 2010, Schiff saw net sales of $204.9million, with net sales of $213.6 million for fiscal year 2011. Its fiscal year2012 resulted in net sales of $258.9 million, with a net income of $13.7million and earnings per diluted share of $0.47. For the first quarter of its2013 fiscal year, the company has reported net sales of $85.1 million, and inits 14C Securities Exchange Commission filing (date Oct. 29 and made publicNov. 5), the company forecasts net sales of $385 million, with pro-forma EBITDAof $84.6 million for its 2013 fiscal year.
Should the offer be accepted, Reckitt Benckiser expects tosee significant synergies as a result of the transaction, which it expects tobe immediately accretive to earnings on an adjusted basis. The company noted ina press release that "sees no reason why this tender offer could not closebefore year end, assuming prompt due diligence, and it will be prepared to signa merger agreement substantially similar to the one Schiff currently has withBayer. Reckitt Benckiser looks forwardto engaging with Schiff's Board and is confident that they will recognize it asa superior proposal."
"We firmly believe that our entrepreneurial andconsumer-focused mindset, our infrastructure, speed and scale, combined withSchiff's leading brand portfolio, will generate sustained value for ourshareholders," said Kapoor. 
Morgan Stanley & Co. Ltd. is acting as exclusivefinancial advisor to Reckitt Benckiser, while Paul, Weiss, Rifkind, Wharton& Garrison LLP was brought on as Reckitt Benckiser's legal advisor.

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