Reckitt Benckiser Group has signed a three year collaboration agreement with Bristol-Myers Squibb (BMS) for a number of market-leading over-the-counter (OTC) consumer health care brands in Brazil, Mexico and certain other parts of Latin America, with an option to purchase at the end of the three year period.
Reckitt Benckiser will license the brands from BMS, who will continue to manufacture them for three years. Key brands included under the agreement are: Naldecon, Luftal, Dermodex, Tempra, Picot and Graneodin-B.
Reckitt Benckiser will initially pay BMS $482 million to enter into the arrangement which also includes personnel, supply contracts and an option to acquire legal title to the related intellectual property at the end of the collaboration period, based on business performance. The transaction will be accounted for as a business combination and the directors are in the process of revaluing the assets and liabilities acquired to fair value, including the value of any acquired intangible assets. Under the terms of a separate supply agreement, BMS will be Reckitt Benckiser’s supplier of the products during the collaboration period.
“This transaction creates a material consumer health care platform, infrastructure and distribution network for RB in both Brazil and Mexico. As such it is an important step in building our consumer health care presence in Latin American emerging markets,” said Rakesh Kapoor, CEO of Reckitt Benckiser. “These market-leading brands have strong margins and I firmly believe they have extremely good growth potential. They fit into our existing OTC categories of pain relief, sore throat, cough and cold, anti-acid and dermatological and will benefit from RB’s consumer marketing and innovation capabilities, and our significant levels of brand equity investment.”
Reckitt Benckiser expects the transaction to be EPS accretive from 2014 under IFRS. Excluding the amortization, the company expects it to be immediately EPS accretive.