Reckitt sells Essential Home stake to Advent for $4.8 billion
(Reuters) -Reckitt has sold a majority stake in its Essential Home business to private equity firm Advent International in a deal valued at $4.8 billion including debt, it said on Friday.
The consumer goods group said it would retain a 30% stake in the business, which makes Air Wick fresheners, Cillit Bang cleaners and insecticide Mortein.
Reuters exclusively reported last month that the two parties were in talks over a sale, with Reckitt likely to retain a minority stake.
Reckitt CEO Kris Licht has been trying to turn around the business and ease shareholder concerns over the strength of its brands in North America and Europe, where consumer confidence has been weak.
A Reckitt spokesperson said the decision to retain a stake provided a potential long-term value opportunity and the deal structure maximised returns for shareholders.
Shares in the company rose as much as 2.3% in early trade before paring gains to stand 0.8% up at 0840 GMT.
"It was the perfect storm between a seller who needs to sell and a buyer with no competition," a source close to the matter said on Friday.
The value of the transaction includes up to $1.3 billion in performance-based and delayed payments tied to how the business performs and other financial conditions, Reckitt said, adding that the deal is expected to close by the end of the year.
"This should be a boost to management's credibility, quite a lot of which was resting on successful execution of this deal," RBC analyst James Edwardes Jones said in a note, though he did describe the proceeds as underwhelming.
JPMorgan analysts also noted that the deal financials were weaker than expected, adding that Reckitt's remaining stake in the business leaves it with large exposure and risks related to Essential Home's performance.
Reckitt said it plans to return excess capital to shareholders, including a special dividend of about $2.2 billion and a share consolidation, after the deal closes.
Essential Home accounted for about 13% of group revenue in the first quarter but sales have struggled for several quarters.
Reckitt, brands of which include Dettol handwash and Durex condoms, has also been considering options for its litigation-hit baby formula business, Mead Johnson.
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