Reckitt Benckiser getting closer to sale of food assets – reports

Reckitt Benckiser is reportedly making good progress on the sale of its food business and could be in a position to begin the proceedings this month.

The consumer goods giant confirmed ‘a strategic review’ of its food business in April in a bid to reduce debt, following the $17.9 billion acquisition of infant formula producer Mead Johnson. It includes the mustard brand French’s and Frank’s sauces – a potentially attractive proposition for the right food company, yet dwarfed by Reckitt Benckiser’s health and personal care products like Veet, Scholl and Durex.

Bloomberg quoted unnamed sources close to the sale, who said that the sell-off could begin this month. Initial predictions were that the business would be worth at least $2.5 billion, but that is now thought to be closer to $3 billion.

Who would buy RB’s brands?

The most likely companies to submit a bid are Conagra Brands, JM Smucker and Campbell’s, which has recently focused on improving its product offering in the spreads and dressings category.

Unilever, which recently acquired the US condiment upstart Sir Kensington’s to put itself in direct contention with Kraft Heinz, could also be in the mix. Unilever CEO Paul Polman confirmed in April that the business would investigate the viability of bidding for Reckitt Benckiser’s business.

As with all big-money acquisitions, the chance of a private equity firm taking over the brands is high, Bloomberg said.

In April, Refresco was the subject of a €1.4bn takeover bid from the private equity owners of ice cream manufacturer R&R.

Analysis: Why RB is dropping its food business

Food has always been a ‘non-core’ area for Reckitt Benckiser, with its food brands making up less than 5% of its group-wide revenues. Indeed, it’s better known for personal care products like Veet, Scholl and Durex, as well as cleaning brands such as Dettol and Cillit Bang.

It’s not difficult to see why food would be a distraction for RB: it sticks out like a sore thumb from a list of the company’s brands. Rivals like Procter and Gamble have concentrated their efforts on the core personal care and hygiene markets, while Unilever, which has some personal care products like Axe/Lynx, does a much better job in the food space.

So it makes sense now, in the face of more than £4 billion’s worth of debt and having committed almost $18 billion to the Mead Johnson deal, that it would offload brands like French’s and ease the pressure from investors.