Reckitt and Glaxo walk away from Pfizer’s $20bn auction
US -listed Pfizer has been shunned by consumer goods specialist Reckitt Benckiser (RB.) and drugs giant GlaxoSmithKline (GSK) after both firms decided not to bid for its $20bn consumer healthcare division.
Reckitt Benckiser walked away as the consumer healthcare business did not fit its ‘acquisition criteria’ and a partial takeover was not possible. Investors approved the decision, marking its shares 4.8% higher to £58.95 on the news (22 Mar).
Investec analyst Eddy Hargreaves supports Reckitt Benckiser’s decision amid concerns about growth in the consumer healthcare industry.
‘Even an acquisition of part of the portfolio could have necessitated an equity issue or a near fire-sale of part of its home and hygiene business,’ comments Hargreaves.
Shares in GlaxoSmithKline nudged 3.3% to £13.15 after it too confirmed its decision not to make a bid for Pfizer’s unit.
GlaxoSmithKline chief executive Emma Walmsley said any acquisitions ‘must meet our criteria for returns and not compromise our priorities for capital allocation’.
Investors had been worried that Glaxo’s dividend would be cut if it had bought the Pfizer operations as debt would have risen significantly.
In a subsequent move, Glaxo announced on 27 March that it would buy out the partner in its own consumer healthcare joint venture, Novartis. It says this will strengthen operational cash flows and enable the business to better plan for capital allocation in the future, namely money to be used as a priority for pharmaceutical research and development. (LMJ)