Reckitt joins Paras race for a bigger play

UK-headquartered Reckitt Benckiser has joined the troop of global consumer and pharma companies to bid for Ahmedabad-based Paras Pharma — the maker of over-the-counter (OTC) brands like Moov, DermiCool, Livon, Krack and the Set Wet range of grooming products. Reckitt has appointed JP Morgan to advise it on the transaction.

Reckitt is not the only one. Sources said Procter and Gamble, one of the world’s largest consumer products company, and Colgate Palmolive, the oral care powerhouse, had also joined the race.

However, it could not be independently verified if they had actually put in bids or hired advisors to do so.

The initial bids — from a combination of global pharma players like GSK and Taisho, among others, and consumer giants — posted last week were in the range of $700 million, considerably less than the earlier estimate of one billion dollars.

Two private equity firms, Actis and Sequoia, that together hold 70 per cent stake in the company, are looking to exit.

This could subsequently see the original promoters of Paras, the Patel family, opt out of the management. Morgan Stanley is carrying out an auction process on behalf of the sellers.

The move has surprised most analysts and bankers, as Paras was considered more a pharma than a consumer company. What adds to the surprise is that the MNC consumer companies which had so far stayed away from acquisitions in India and preferred to build their own businesses are getting into the fray.

Mails and calls to Chander Mohan Sethi, chairman & managing director, Reckitt Benckiser India, elicited no response till the time of going to press. Colgate-Palmolive declined to comment while P&G, in response to a mail, said: “This is incorrect and purely media speculation.”

Investment bankers, however, had a different take. “Pharma players like Taisho may look at Paras most aggressively as an Indian entry strategy and therefore may put in the most aggressive bid, but Reckitt won’t let go easily. It’s probably best suited among the consumer players. It wants to strengthen its OTC portfolio and Paras gives it great brands and distribution straight away,” said a banker aware of the developments.

Reckitt has a combination of OTC and fast moving consumer goods (FMCG) products — which gel perfectly with Paras. While the 75-year-old antiseptic brand Dettol is the biggest in its portfolio, contributing nearly 50 per cent of its Rs 2,000 crore top line, Reckitt has been aggressively trying to expand its share in India by introducing many of its global power brands.

Among other products in Reckitt’s portfolio in India are Harpic, Lizol, Colin, Mortein, Vanish, Easy Off Bang, Air Wick and Finish in the home care arena, while OTC products include Disprin, Clearasil and Strepsils. It also has products like Veet in personal care and Cherry Blossom in the shoe care space.

“It’s the OTC portfolio that Reckitt is keen to expand in India. In Paras, compared to its personal care or consumer brands, the healthcare portfolio will have more traction for many. Its brands from Moov to DCold or Krack have been category breakers. For Reckitt, in line with an India-focused strategy, this is the best route to grow after Disprin or Strepsils,” said an analyst who has been tracking the sector.