Reckitt, of Slough, England, said it will launch a tender Friday worth $42 per Schiff share, or $1.4 billion in total, above the $34 per-share, $1.2 billion offer from Bayer. The Reckitt tender is a 45% premium to Schiff's closing share price the day before Bayer's Oct. 30 takeover agreement.
"This acquisition would provide a powerful entryway into the large and rapidly growing $30 billion global vitamins, minerals and supplements market. This market would be the largest consumer health care sector in which we operate," said Reckitt Benckiser CEO Rakesh Kapoor in a statement.
The deal would add a new branch to the company's consumer health division, which includes Scholl footcare products and Strepsils lozgenges, and cement it as Reckitt's second-largest division. It would also pit the company against established purveyors of vitamins and sport supplements including the far larger Pfizer Inc. and Nestlé SA.
The Reckitt tender means an even bigger payout for TPG Capital. The Texas private equity shop two years ago paid $48.8 million to buy a 25% stake at $6.52 per share. If Reckitt's tender is successful, that would create a sixfold return.
Schiff and Bayer had hammered out their agreement together but, in regulatory filings, Schiff said it could review alternative approaches through Nov. 28. That agreement, which has the blessing of Schiff's largest shareholder and founder, Weider Health and Fitness Inc., includes a $22 million breakup fee.
Schiff shares traded above Reckitt's offer price in after-hours trading Thursday, indicating some investors are betting on a bidding war. However, analysts such as Commerzbank AG's Daniel Wendorff and Kepler Capital Markets SA's Martin Voegtli cautioned Bayer against a higher offer.
"It could be difficult to cover the capital costs even with the larges synergies," wrote Kepler's Voegtli in a note. He has a buy rating on Bayer.
Schiff investors will have little say in the deal since Weider and TPG together own 85% of the target and, should they tender, can trigger squeeze-out regulations, forcing out hesitant shareholders.
Schiff is based in Salt Lake City, Utah and had sales of $259 million in the year ended May 31. It expects revenue to jump as much as 46% as consumers continue to clamor for its Airborne disease-fighting, MegaRed cardiac and Move Free joint supplements.
Reckitt is taking legal advice from Paul, Weiss, Rifkind, Wharton & Garrison LLP's Toby Myerson, Kelley Parker and Steven Williams, with Morgan Stanley providing financial advice.
Bayer was advised by Bank of America Merrill Lynch with counsel coming from Sullivan & Cromwell LLP's Matthew Hurd, Matt Friesedt and Blaze Waleski as well as Jones Day's Phil Proger and Johannes Zöttl.
Rothschild is Schiff's financial adviser, with a Latham & Watkins LLP team of Tad Freese, Jamie Leigh, Robin Struve, Laurence Stein, Anthony Klein, Karen Silverma and Joshua Holian handling legal details.
Thompson Hine said partners Roy Hadley Jr. and John Watkins joined its corporate transactions and securities and business litigation practice groups, respectively. For other updates launch today's Movers & shakers slideshow.
The origination partner with The Riverside Co. talks about manufacturing M&A with private equity senior editor Jon Marino. More video