Image source: © 2025 Krish Capital Pty. Ltd.

Highlights

  • RKT to Sell Essential Home at Valuation of Up to GBP 4.8 Billion
  • RKT to Retain 30% Equity in Essential Home Post-Divestment
  • RKT Confirms GBP 2.2 Billion Special Dividend Following Transaction Completion

Reckitt Benckiser Group plc (LSE:RKT) has announced that it has reached an agreement with private equity firm Advent International to divest its Essential Home business in a transaction valuing the unit at up to GBP 4.8 billion. As part of the agreement, Reckitt will retain a 30% equity interest in Essential Home, while Advent will take majority control through its acquisition vehicle. The Essential Home division, which includes brands such as Air Wick, Calgon, Woolite, Cillit Bang, Resolve, Sole, and Easy-Off, accounted for approximately 14% of Reckitt’s total net revenue in 2024. The divestment aligns with Reckitt’s previously stated strategy from July 2024, which focuses on streamlining the company around its core portfolio of 11 consumer health and hygiene "Powerbrands."

Essential Home generated GBP 2.0 billion in net revenue in 2024, and an adjusted operating profit of GBP 490 million for the twelve months ending 31 December 2024. For the quarter ended 31 March 2025, the unit recorded GBP 482 million in net revenue, reflecting a 7.0% like-for-like decline year-on-year. Over the 12-month period ending 31 March 2025, the business generated GBP 486 million in unaudited adjusted operating profit, according to figures provided by Reckitt. The agreed valuation reflects an enterprise value multiple of 7.7x adjusted operating profit for the period. Of the GBP 4.8 billion enterprise value, approximately GBP 1.3 billion is in the form of contingent and deferred consideration. This includes USD 0.4 billion linked to performance in 2025, GBP 0.3 billion in vendor financing, and GBP 0.6 billion conditional on return thresholds.

Cash proceeds from the deal will be subject to balance sheet adjustments and the value of Reckitt’s equity interest at closing. Reckitt expects to incur around GBP .8 billion in separation and one-time costs, mostly due in 2026. Upon completion, Reckitt intends to return c. GBP 2.2 billion to shareholders via a special dividend and share consolidation. This will be in addition to the company’s ongoing share buyback programme, with the next tranche to be announced alongside the company’s H1FY25 results on 24 July 2025. The divestment includes the transfer of six manufacturing sites located in Mexico (Tijuana), Hungary (Tatabánya), UK (Derby), Spain (Granollers), Portugal (Porto Alto), and Argentina (Florencio Varela). A portion of a plant in Brazil (Raposo) is also expected to be carved out in due course.

Reckitt and Advent will enter into a shareholders’ agreement, under which Reckitt will retain board representation and minority consent rights. Advent will hold preference rights on returns above specified thresholds. Both parties will also sign Transitional Services Agreements (TSAs) and Manufacturing and Supply Agreements (MSAs) to ensure continuity during the separation. The transaction is expected to close by 31 December 2025, subject to regulatory approvals and consultations with Reckitt’s works councils and employee bodies in various jurisdictions, including France and the Netherlands.

Following separation, Reckitt aims to mitigate stranded costs and remains on track to achieve a previously stated objective of reducing fixed costs by at least 300 basis points. The company targets exiting 2027 with fixed costs at approximately 19% of net revenue. Essential Home operates in over 70 markets across the air care, surface care, pest control, and laundry categories. 

RKT is trading at 1.72% higher at GBX 5,067.55 per share as on 18 July 2025.