By Saabira Chaudhuri
Reckitt Benckiser Group PLC has received regulatory clearance
from U.K. authorities to buy the K-Y brand of intimate lubricants
from Johnson & Johnson, but will be forced to license out the
brand for several years.
The U.K. consumer-goods company, which already owns condom brand
Durex, agreed to buy K-Y last year. The acquisition ran into a
roadblock in December when the U.K.'s Competition and Markets
Authority said the deal could result in a "substantial lessening of
competition" and higher prices for consumers because no other
brands are available in many shops.
At the time, the regulator asked Reckitt and J&J to take
steps to allay their concerns. Then in January, the CMA said
measures put forward by Reckitt since December were found to be
insufficient and announced it was launching an investigation into
the deal.
Wednesday, Reckitt said the U.K. regulator is requiring it to
license the K-Y brand in the U.K. to a third party for eight years.
During that period, the company selling K-Y would create its own
brand, following which Reckitt would take back control of K-Y.
The clearance comes after Reckitt in April failed to get
approval from New Zealand's Commerce Commission to buy K-Y's
regional business there, saying it would damage competition.
Chief Executive Rakesh Kapoor told journalists last month that
the U.K. and New Zealand businesses were "a very tiny part" of the
K-Y portfolio, and that the U.S. was the most significant. K-Y is
sold in over 50 countries, but its biggest revenue streams are the
U.S., Canada and Brazil.
Under Mr. Kapoor, Reckitt has been shifting its focus toward
higher-margin consumer health products, and in July the Slough,
England-based company's health unit reported a 13% rise in
comparable sales for the first half. At the time, Mr. Kapoor said
the K-Y acquisition had helped results.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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