RECKITT’S : TRADING SHORT

The rationale for the deal becomes clear today with a very poor +1% LFL and underwhelming guidance of 3% organic vs the market closer to 4.5%. Growth is slowing, potential acquisitions are few and far between. They need to buy growth to sustain their premium rating.

Most acquisitions are accretive given financing costs. It doesnt seem right that a deal the market doesn’t want is automatically rewarded. To make matter worse they guide for double digit accretion in year 3 – bulls were going for 20%+. This is disappointing.

The new news today is the weakening underlying trend. With the market having priced in 8% of the synergies already and having to wait 3 years to see them, this is a trading sell.