Reckitt Benckiser will be headquartered in the UK and listed on the London Stock Exchange. He said this would involve focusing on core products in the fabric care, surface care, health and personal care, dishwashing and home care categories to achieve top-line growth. This will mean rationalising what Mr Brecht called “non-strategic, tail-end products” whose profitability has been declining by 15 per cent a year across the two companies.The Reckitt-Benckiser merger should generate pounds 75m in annual pre-tax cost savings by the end of 2001 after increasing marketing expenditure by a proposed 25 per cent. Bart Becht, Benckiser’s chief executive officer and the proposed CEO of the merged firm, refused to comment in detail but said that the majority of the merger’s pounds 120m restructuring cost will be used for redundancy pay- outs.At a press conference yesterday, Mr Becht outlined the proposed company’s strategic drive.
If Reckitt accepted a counter takeover proposal, it would stand to pay Benckiser a pounds 30m break-up fee.The proposed merger will inevitably bring job losses. If employees were reduced at the same rate as costs, redundancies could reach 1,500. The combined portfolio will contain household names such as Reckitt’s Dettol, Harpic and Lemsip and Benckiser’s Vanish, Finish and Calgon The merged company will be called Reckitt Benckiser. The firm issued a profits warning last autumn following turmoil in emerging markets and destocking by customers.
Interim profits halved to pounds 78.3m in the six months to 3 July.If the deal goes ahead, it will create the world’s largest household cleaning company, excluding laundry products. Unilever, the Persil to Flora group, has been suggested as a likely candidate. The Anglo-Dutch company would not comment, but a spokesman pointed out that in February the firm paid back pounds 5bn to shareholders because it was not considering any acquisitions.
Yesterday’s announcement of the planned merger between Reckitt and Benckiser follows a tough year for the UK company. RECKITT & COLMAN shares soared yesterday on hopes of a bid battle following the UK household product group’s announcement of a pounds 4.86bn merger with Benckiser of Holland. Reckitt’s shares closed 12 per cent up at 785p on speculation of a counter-offer. The company also has communications and distribution operations.Outlook, page 17. The deal is due to close by November.The consolidation of Cellnet into a wholly-owned subsidiary convincingly positions BT to bid next year for one of the five third-generation mobile licences that will usher in a range of broadband services such as mobile video phones.Securicor is understood to be close to making a pounds 300m acquisition in the security sector.
That is expected to dilute earnings per share by 2.3p in the year to March 2001. The transaction will see BT dip into its bank reserves to pay Securicor shareholders in cash or a loan note alternative, a move designed to minimise tax liabilities. This compares with the pounds 11.7bn market capitalisation of Orange, the third- largest operator.”I think BT struck a good price,” said Jim McCafferty, an analyst with SG Securities. “It means their UK cellular business is being valued at less than pounds 8bn, lower than the valuation for Orange, which has just under half the customer base of Cellnet.”Investors agreed, and BT shares added 66p to 1,117p. Securicor also made gains, rising 39p to 583.5p on market-leading volume of 28.4 million shares.Securicor said its major shareholders, which include Mercury Asset Management with 6 per cent and Standard Life Assurance, were supportive of the transaction.Cellnet made pre-tax profits of pounds 118m in the year to March on net assets of pounds 431m.BT will amortise pounds 3bn in goodwill charges at pounds 150m a year for 20 years. It is understood that Securicor’s three Cellnet directors, led by managing director Roger Wiggs, would have been forced into legal action had BT taken that course.The acquisition places BT in a position to capture the full value that has accrued to assets in the mobile phones sector.Some analysts question the sale price, which values Cellnet, the number two mobile operator with more than 5 million customers, at about pounds 7.9bn. BT had tried to buy out the stake in 1995, but was blocked by the government.
Sources said talks about a sale were resumed two weeks ago, apparently at the instigation of Securicor.BT, anxious to avoid overpaying, has threatened to bid for a third-generation mobile licence on its own, capping Cellnet’s growth potential and value.
