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Date : 14-12-2010 News / Story reproduced with thanks: Economic Times

Reckitt Benckiser to buy Paras Pharmaceuticals for Rs 3,260 crore

14 Dec, 2010, 05.15AM IST,ET Bureau NEW DELHI/ KOLKATA/ MUMBAI: British consumer goods firm Reckitt Benckiser Group , makers of Dettol and Disprin, on Monday confirmed it will buy Ahmedabad-based Paras Pharmaceuticals for 3,260 crore ($726 million), in a move that shocked rival bidder Emami. Our offer price was much more than at what the deal has been signed. I don t understand how the deal was signed at such a price, Emami Executive Chairman RS Agarwal told ET minutes after Reckitt announced the signing of the deal in London. The buyout will add more than 400 crore to Reckitt s annual revenues and 10 brands, including Moov, Krack, Dermicool and Set Wet, to its portfolio. Reckitt is paying around 30 times Paras Pharma s earnings before interest , tax, depreciation and amortisation (Ebitda) for 2009-10 , but analysts feel the price is not steep because most Paras products are among the top brands in their categories. Also, India is one of the fastest-growing consumer markets in the world. In fact, Agarwal said the Kolkatabased consumer goods firm had made a much higher offer for Paras, but declined to reveal the price. A person close to the development said Paras shareholders opted for Reckitt because the British multinational was willing to pay at one go while Emami wanted to make a staggered payment. Also, Reckitt is seen to have more financial and marketing muscle than Emami and another hot contender, Taisho, to power Paras brands to the global stage. MNC likely to take Paras brands abroad Reckitt Benckiser is a natural home for Paras brands, JM Trivedi, partner and head of South Asia at private equity fund Actis , said in a statement. Actis will sell its 63% stake in Paras to Reckitt, earning more than three times its initial investment of $145 million made in 2006. Reckitt will also buy out other shareholders, including company founder Girish Patel and his family. Private equity fund Sequoia will get roughly $50 million for its 7-8 % stake. The transaction will take place in India and attract capital gains tax. Reckitt Benckiser, which has 19 global powerbrands, including Finish dishwashing soap, Dettol antiseptic soap, Airwick air freshner and Veet hair remover , reported a net income of $2.24 billion on revenues of $12.25 billion in 2009. Developing markets, which include Latin America, Africa, the Middle-East and Asia, account for about a fifth of Reckitt s revenues.
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The turnover of its unlisted India arm is estimated at close to Rs 2,000 crore. The multinational with a presence in more than 60 countries is now expected to take Paras brands abroad. Reckitt could leverage Paras brands to launch them in international markets, tapping Indian origin population in Western countries. Pain-relief ointment Moov may be the first Paras brand to hit the international market soon, a person close to the company said. Reckitt Benckiser South Asia President Chander Sethi said Paras Pharma s healthcare portfolio , which includes Krack heel-care lotion, D Cold flu remedy and Itch Guard antifungal cream, will give the British company a platform for new growth in India besides attractive cost synergies. Varun Lochab, Executive Vice-President , institutional equity research, Religare Capital (RCML), said the acquisition of Paras will give Reckitt greater access to the Indian market, particularly in the healthcare segment where it was left behind by its peers. Globally there are few pockets where companies are registering growth and India is one of them, he added. The deal is one of the largest M&A exits for a private equitycontrolled firm in India. While Reckitt Benckiser was advised by JPMorgan, Actis and the other Paras shareholders were advised by Morgan Stanley. Analysts say this will set the pace for deals of similar size across sectors, with markets opening up and economy booming. As a growing economy, the industry will witness more such activities in sectors with direct consumer connects, said Ajay Parmar, head of institutional equities at Emkay Global Financial Services , a Mumbaibased brokerage house. There could soon be big deals in pharmaceuticals, auto ancillary and agri inputs industries, he added. The consumer goods space will be less active, not because of lack of interest but because of lack of availability of big brands after a slew of deals. The impact on Indian consumer companies would not be material, said Abheek Singhi, partner & director at Boston Consulting Group. Paras would have represented an interesting buy for Indian companies but there is no other major second order impact. Recent big deals include Piramal Healthcare s sale of its domestic formulations business to US drugmaker Abbott for . 17,000 crore in May. The Emami group acquired Zandu Pharmaceuticals for more than Rs 750 crore two years ago while Dabur bought Fem Care for Rs 259 crore in late 2008. Before that, in 2005, Dabur had bought out Balsara s hygiene and home product businesses for Rs 143 crore. Direct link to the News/Story:http://economictimes.indiatimes.com/articleshow/7096462.cms?prtpage=1

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