Reckitt to offload Essential Home brands, return $2.2bn to shareholders

(Sharecast News) - Consumer products giant Reckitt Benckiser has announced it is selling off a controlling share in its Essential Home division to private equity firm Advent International in a deal that values the portfolio at $4.8bn. The transaction, which will see Reckitt retain a 30% equity stake in business, will see the company return $2.2bn to shareholders via a special dividend along with a share consolidation upon completion.

Essential Home operates across the air care, surface, pest and laundry segments, known for brands like Air Wick, Calgon and Cillit Bang.

Reckitt says the deal aligns with its strategic plan unveiled last summer to reshape the company into a leading a consumer health and hygiene company focused on a portfolio of 11 high-growth, high-margin so-called "Powerbrands".

The enterprise value of $4.8bn equites to 7.7 times Essential Home's adjusted operating profits for the past fiscal year, and includes up to $1.3bn of contingent and deferred consideration.

Reckitt said it expects to incur cash tax, transaction and other one-off costs relating to the separation of Essential Home of $0.8bn, with the majority payable next year.

However, the company added that it "intends to mitigate the stranded costs from the separation of Essential Home and remains on track to unlock previously communicated cost efficiencies, delivering at least a 300bps reduction in fixed costs and exiting 2027 with a fixed-cost base of c. 19% of net revenue".

Chief executive Kris Licht said the divestment represents a "significant step forward in unlocking the substantial value in our business".

Licht added: "This moves Reckitt towards becoming a simpler, more effective world-class consumer health and hygiene company and it will enable us to focus on a core portfolio of high-growth, high-margin Powerbrands."