Reckitt Benckiser and GlaxoSmithKline target Latin America

RELATED QUOTES

SymbolPriceChange
RB.L4,915.00+63.00
GLAXF26.649+0.249
NOT.BE60.36+1.55
ABT38.38+0.41
PFE30.09+0.20

Latin America is the new frontier for British business with Reckitt Benckiser (LSE: RB.L - news) agreeing a $482m (£308m) over-the-counter drugs deal in the region and GlaxoSmithKline (Other OTC: GLAXF - news) exploring a potential multi-billion dollar takeover of a Brazilian rival.

Reckitt, the maker of Cillit Bang and Dettol, is to pay US pharmaceutical group Bristol-Myers Squibb to sell cough, cold and pain-relief drugs in Brazil and Mexico, a further step away from its roots as a maker of household cleaning products.

The deal came as GSK was reported to be one of several groups exploring a potential takeover of Aché Laboratorios Farmaceuticos.

Aché is a privately owned business that could fetch up to $4bn (£2.6bn), according to well-placed sources. Other drugmakers likely to be interested include Novartis (Berlin: NOT.BE - news) , Pfizer (NYSE: PFE - news) and Abbott Laboratories (NYSE: ABT - news) , although all companies declined to comment.

The Reckitt deal is part of chief executive Rakesh Kapoor’s strategy to reduce the company’s reliance on ailing European economies amid uncertain consumer confidence across the continent.

Last year, Reckitt moved into the vitamins and nutrition supplements market by acquiring Schiff Nutrition for $1.4bn, while other recent acquisitions have included deals for Adams Respiratory Therapeutics and the maker of Durex condoms, SSL International.

Mr Kapoor said the deal with Bristol-Myers is an “important step in building our consumer health care presence in Latin American emerging markets”.

He added: “These market-leading brands have strong margins and I firmly believe they have extremely good growth potential. They fit into our existing over-the-counter categories of pain relief, sore throat, cough and cold, anti-acid, and dermatological and will benefit from Reckitt’s consumer marketing and innovation capabilities, and our significant levels of brand equity investment.”

Shares in Reckitt rose 27.16p to £42.62, while Glaxo shares climbed 4.5p to £14.57.

Under the deal with the US company, Reckitt will sell the brands for the next three years while Bristol-Myers will continue to manufacture the drugs. At the end of the three-year period, Reckitt will have the option to buy the products, which generated revenues of $102m in 2012.

There are six key brands that Reckitt will sell, including Naldecon, the leading cough and cold brand in Mexico, and Tempra, the biggest drug in Brazil for adult and paediatric pain relief.

Andrew Wood, analyst at Bernstein, said the deal “is another step in Reckitt’s transformation from being, principally, a European household goods company into becoming a global consumer health company.”

Reckitt is scheduled to post annual results on Wednesday. The consensus estimate from analysts is that like-for-like revenues rose 4pc in 2012 and operating profits rose from £2.4bn to £2.49bn.