After what looked to be a set agreement between Bayer and Schiff Nutrition, Reckitt Benckiser made a counterbid of $1.4 billion after markets closed on Thursday.
Reckitt Benckiser, a British company which produces Strepsil cold remedies and Gaviscon heartburn relief, is offering the supplement and nutrition company $42 a share, $8 more per share than Bayer’s $1.2 billion offer.
But nothing is a done deal. Bayer could still make a counter offer. They are holding meetings today to evaluate the situation and decide on their next step.
Andrew Wood, an analyst at Sanford C. Bernstein, told Bloomberg:
“There is certainly a possibility that Bayer may announce a counterbid to RB’s offer, even though it would require Bayer eating its words that its current bid is already above what it considered as exceptionally fully valued.”
Wood also said he thought the new offer could bring in additional interest from other global companies—maybe even Johnson & Johnson.
If Schiff accepts the Reckitt Benckiser bid, they will owe Bayer a $22 million breakup fee. According to the agreement established by the two companies, Schiff could accept a higher offer within 30 days if the company pays the breakup fee to Bayer.
Reckitt Benckiser believes if Schiff accepts the offer, the deal can be closed by year’s end.
NBJ bottom line
As the remaining few multinational consumer-health companies without supplement businesses scrabble over the salable companies, the multiples offered have reached near-comic proportions. "Valuations have been very frothy, though that often has a short life," said David Thibodeau, managing director at 212 Equity/Wellvest Capital.
The blood was in the water when Pfizer bought Emergen-C maker Alacer at the beginning of the year, setting off a string of strategic acquisitions with escalating buy prices. Assuming Bayer makes a counterbid on Schiff, it would represent a multiple of 30x EBITDA or more.
The counterbid is especially interesting in light of a series of recent lawsuits leveled against Schiff alleging that the company did not seek out the maximum possible value for all of its shareholders. Two parties—TPG Growth and Weider Health and Fitness—control 85% of Schiff’s voting rights. Minority shareholders may welcome the Reckitt Benckiser bid, but the board may balk at the breakup fee.
In any case, the supplement market is bound to stay hot. "There are many pharma companies that could still play in this space," said Thibodeau, "and the ones that have played will continue." As those large strategics start to come off the sidelines, we can expect more consolidation—and more marquee buy prices—through 2013.
"Over the next 12-36 months, we may see some interesting, aggressive transactions happening," Thibodeau said. "The supplement industry has now moved into a different arena."