19 November, 2009
UPDATE 3-Reckitt up on talk of Colgate link, mkt sceptical
* No strategic benefit for Colgate-analyst
* Structuring a deal would be difficult-analysts
* Reckitt shares rise as much as 3.7 percent
* Reckitt and Colgate decline comment
(Adds further details on Reckitt, updates shares)
By David Jones
LONDON, Nov 19 (Reuters) - Reckitt Benckiser (RB.L) shares rose as much as 3.7 percent on Thursday on a report of a link-up with U.S. peer Colgate Palmolive (CL.N), but analysts were sceptical of an immediate tie-up between the two.
A spokeswoman at the British household cleaning goods group had no comment on the media report, while Colgate's CEO Ian Cook also declined comment in an interview with Reuters earlier on Thursday in China. [ID:nHKG266231].
A potential deal would link Reckitt's products like Finish dishwasher detergent, Lysol disinfectant and Cillit Bang cleaner with Colgate's namesake toothpaste and toothbrushes, dishwashing soap and other products such as Hill's pet food.
"No comment. We don't comment on market rumours. Period," Cook told Reuters when questioned about a Reckitt link-up.
Reckitt shares rose to a high of 32.20 pounds and were trading up 2.4 percent at 31.80 pounds by 1410 GMT, while Colgate shares ended Wednesday 3.7 percent higher at $85.87, but fell to $85 in heavy premarket trading on Thursday.
"We are sceptical on the imminence of a deal between the two," said analyst Charlie Mills at Credit Suisse.
Mills said he was not aware of any immediate catalyst for a deal to take place, but if a deal were to happen it would most likely be a merger of equals. Reckitt is valued at $37.2 billion and Colgate at $41.2 billion.
"Strategically a merger doesn't make sense for Colgate," said Bill Pecoriello, CEO of ConsumerEdge Research.
Other analysts also doubted whether there would be a link-up between the two highly rated stocks, as it would be difficult to structure a deal to give value to all shareholders and keep both management teams happy.
"This feels a bit thin, it would be very difficult to structure a deal between the two," said another analyst.
Reckitt has been one of the star performer on the UK stock market since underperforming British group Reckitt & Colman took over German Benckiser in 1999 and put Benckiser's Dutch Chief Executive Bart Becht in charge of the enlarged group.
Becht charted the group's rapid growth, launching innovative products backed by increased marketing spending and reviving older brands such as Vanish stain remover, Woolite fabric cleaner and Airwick air fresheners.
He boosted growth by buying Boots' non-prescription drug business with products like Nurofen painkillers in 2005 and then U.S. cough and congestion medicine group Adams in 2008.
Strong sales growth and cost cutting saw Reckitt's meet Becht's target to match the margins of U.S. peers Colgate and Procter & Gamble (PG.N), and resulted in it matching their once much higher share ratings.
Over at Colgate, British-born Cook joined its UK operations in 1976, and after serving in senior marketing management roles around the world, became chief operating officer in 2004, was named CEO in 2007 and then also became chairman in January 2009.
Cook has been more reserved in his public appearances for the New York-based company than former longtime Chairman and CEO Reuben Mark, whom he succeeded, and was well known for quick, humorous comments on conference calls and in presentations.
The share price rises were prompted by a market report in Britain's Daily Telegraph newspaper which said takeover activity surrounding Cadbury (CBRY.L) had led to bid speculation elsewhere, and cited talk that Reckitt was close to announcing a deal -- with the most obvious candidate being Colgate.
The report related this speculation to a Nomura analyst note earlier this year which said Colgate could merge with a British company, but the Nomura analysts thought Unilever (ULVR.L) would be the U.S. company's more obvious partner. (Additional reporting by James Pomfret and Jessica Wohl; Editing by David Holmes and David Cowell)
Source: http://www.reuters.com
UPDATE 3-Reckitt up on talk of Colgate link, mkt sceptical Added: (19.11.2009)
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