Reckitt Sells Majority Stake in Essential Home Unit

Reckitt sold a majority stake in its Essential Home business to private equity firm Advent International. The $4.8 billion deal includes debt. Under terms of the agreement, Reckitt retains a 30% stake in the business, which makes Air Wick fresheners, Cillit Bang cleaners and insecticide Mortein.

The decision to retain a stake provides a potential long-term value opportunity and the deal structure maximizes returns for shareholders, according to Reckitt. Essential Home accounted for about 13% of Q1 sales. But the business struggled for several quarters.

Reckitt shares rose in early trading before closing up less than 1%. Reckitt brands include Dettol handwash and Durex condoms. The company is weighing options for its baby formula business, Mead Johnson, which has been involved in numerous lawsuits.

Terms of the Deal

The value of the Essential Home 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.

Analysts praised execution of the deal, but noted the financials were weaker than expected. 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.