Will the takeover of SSL International by Reckitt Benckiser create shareholder value?

Today, the British producer of household, health and personal care products, Reckitt Benckiser (GB:RB.), announced a cash offer for SSL International plc (GB:SSL). SSL International is a consumer brand company with the global brands Durex and Scholl plus a diverse portfolio of locally owned brands. RB will pay 1171 Pence in cash to shareholders of SSL. The offer price plus the SSL dividend values amounts to approximately GBP 2,540 million. Here are some fiscal figures:












SSL generated in fiscal 2009/2010 revenues of GBP 803 million. Net income of the company amounted to GBP 71.4 million – a net profit margin of 8.9 percent. The margin of RB is significant higher and amounts to 18.3 percent.

The price RB pays for SSL is high. Regard, SSL is valuated with a P/E ratio of above 35. But RB announced to realize additional GBP 100 million in cost savings up to fiscal 2012. If we consider this, the P/E ratio fall to 14.6.
Finally, we see that the gross margin of SSL is slightly higher than the value of RB but not the net profit margin. This could be a sign a potential margin increase.

A great question is still the amount of further realized sales synergies by the synchronization of distribution channels. We could only speculate about that. Fact is, that RB realizes an additional sales growth of above 10 percent for fiscal 2010. In Q1, RBs sales growth was only 4.7 percent and 6 percent at constant exchange rates.Net income rose in Q1 by 15 percent and 17 percent at constant exchange rates. The double-digit growth story of RB is still running.