From today's Telegraph "On Tuesday, Royal Bank of Scotland told clients that last week they had an "interesting" meeting with Reckitt Benckiser's management. "There were a couple of off-the-cuff comments on 'attractive opportunities' that sounded interesting. Suffice to say, one brief comment was with regards to the condom business and how it would fit into their acquisition template," said the RBS salesman. He concluded: "The whole SSL/Scholl North America dynamic, the stumbling block last time around, has changed a bit and could make the takeout story more intriguing now." SSL gained 20½ to 841p."
SSL shares are up another 29p this morning to 871p. I am sceptical because SSL's Scholl brand is owned by Schering Plough in the U.S. under the Dr Scholl umbrella. Also RB will be reluctant to over pay. Assuming a takeover price of £10.00 and earnings per share of 35p in 2010 this puts it on a forward p/e of 29. Finally it would be surprising if RB would be able to accelerate the growth of Durex too much faster than SSL itself. The contrary argument is that cash rich Reckitt needs a big acquisition to fuel further earnings growth. Could be an interesting couple of days for RB and SSL but the likelihood is its yet another false rumour. Shorts placed between 875p and 880p this morning.
