Health, hygiene and home products powerhouse Reckitt Benckiser (RB.) rises 5.3% to £47.40 after launching a strategic review of its pharmaceuticals business. Amid speculation a multi-billion pound sale is on the cards, the review stokes demand for shares in the Nurofen painkillers-to-Durex condoms maker.
Investec Securities' Martin Deboo reckons the business could fetch between £2.5 billion and £5.5 billion or 350p to 800p per Reckitt Benckiser share. He writes: 'Critically, the decision to conduct a 'strategic review' of RBP signals an intent to exit, in our view, and a move to resolve a troublesome valuation hangover, once and for all.'
Reckitt chief executive Rakesh Kapoor says shareholders are likely to be updated during 2014. The sale of RBP has been a long time coming and won't surprise long-term followers of Reckitt, whose brand portfolio includes the likes of Airwick, Scholl, Mucinex and Cillit Bang.
Investors have struggled to value the pharmaceuticals business following the launch of generic tablet alternatives to Suboxone, a development which prompted Reckitt to stop making tablet versions of Suboxone in the face of likely price erosion.
Today's third quarter trading statement from the £32.6 billion cap shows like-for-like sales up a better-than-expected 5%, excluding the pharmaceuticals arm and driven by emerging markets and continued growth in Europe and North America.
Indeed, the pharma arm reports a 16% like-for-like sales decline in the third quarter, reflecting the decision to stop making tablet versions of Suboxone, although Reckitt has maintained its 68% market share of Suboxone sold in film-strip format since the launch of generic tablets.