Condom Maker Sold for a Boatload

August 27th, 2010 | Sources: Wall Street Journal

UK-based consumer-products giant Reckitt Benckiser Group has entered the bedroom by acquiring SSL International, the maker of Durex, for $3.9 billion. Durex is the world’s best-selling condom brand.

Before purchasing the condom-maker, Reckitt had accumulated a ménage of decidedly unsexy products including d-Con mousetraps, Clearasil acne cream, Veet hair remover, Mucinex decongestant, Lysol disinfectants and Harpic toilet-bowl cleaner.

In marketing Durex, SSL had recently moved from a “safe sex” message to “better sex.”  It introduced a line of lubricants and began selling vibrators in supermarkets and pharmacies. It also entered emerging markets like India and China. Durex sales rose nearly 5% last year, to $410 million.

In addition to condoms, the SSL deal allows Reckitt to market Scholl bunion pads outside the US (Merck has rights in the US), where they can enhance Reckitt’s already profitable line of OTC health care products including Gaviscon heartburn elixir and Strepsils cough drops. Even before the deal, health and personal care had been Reckitt’s largest market, accounting for about 40% of its $9.3 billion in sales.

In this market, shoppers will pay a premium for trusted brands, according to Julian Hardwick, a Royal Bank of Scotland analyst. “If you’ve got a sore throat, runny nose or splitting headache,” she explained to the Wall Street Journal, “You want something to sort that out for you. You really don’t care how much you pay for it.”

Reckitt’s offer of £11.71 per share was 45% above SSL’s average share price over the last 6 months. SSL shares traded below £5.50 just 9 months ago, suggesting the acquisition might have come a bit late for Reckitt.

The deal was prompted by pressure from consumer-goods colossus Procter & Gamble, which had been gaining market share vs. Reckitt in several categories in Western Europe over the last year.


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