Britain's Reckitt Benckiser said on Monday it had agreed to buy U.S. drugs group Adams for $60 a share in cash, or $2.3 billion in total, to mark its entry into the U.S. healthcare market.
Reckitt, the world's largest household goods maker with products such as Cillit Bang cleaner and Lysol disinfectants, has been expanding its healthcare side with last year's purchase of Boots' Nurofen pain killers and Strepsil throat lozenges.
Adams Respiratory Therapeutics is a NASDAQ listed specialty pharmaceutical group headquartered in Chester, New Jersey, and markets two non-prescription or over the counter (OTC) cough treatments, Mucinex and Delsym, in the U.S.
"It will provide Reckitt Benckiser an entry into healthcare in the USA, the world's largest OTC market," said Reckitt's Chief Executive Officer Bart Becht said in a statement.
He expects the deal to enhance earnings immediately, excluding a $60 million one-off restructuring charge, while he see substantial cost synergies from integrating Adams.
After these cost savings, the operating margins on the Adams business are expected to be similar to Reckitt's existing consumer healthcare business, the group said.
Adams sales have grown to $332 million in the year to June 2007 from $14 million some four year before. Income before income taxes for the year ending June 2007 was $48 million.
Mucinex is the U.S. market leader in adult expectorants and accounts for most of Adams' sales, and Reckitt says it will become a rapidly growing top brand in its healthcare portfolio.
"The growth potential of the business, the importance of gaining an entry in the USA healthcare market, and the synergies available make Adams a very attractive addition to our portfolio," Becht said.
Reckitt shares were up 1.2 percent at 29.58 pounds by 1437 GMT, while Adams shares closed at $43.68 on Friday.
"This looks like a good bolt-on deal for Reckitt with the potential of getting its healthcare products into the U.S.," an industry analyst said.
Reckitt intends to launch a tender offer for Adams shares in the next 20 business days which it expects to end in January or early February 2008. The deal is subject to anti-trust approval in North America, but no material issues are expected.
When Reckitt took over Benckiser in 1999 to become the world's biggest household goods maker, it already had a healthcare unit selling Lemsip and Disprin cold remedies, and this was expanded in February 2006 with the acquisition of OTC drug unit BHI from Boots which helped drive Reckitt's growth.