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* Shares in relief rally over dropped Pfizer bid
* Organic growth opportunities to take longer
* If Pfizer deal falls apart, Reckitt may get second crack
By Martinne Geller
With a deal off the table, investors will turn theirattention to Reckitt's internal challenges, including theintegration of Mead Johnson, the ailing baby formula maker itbought for
"The market has been used to Reckitt being the company thatconsistently delivered ahead-of-market volume growth and lastyear they didn't," said Reckitt shareholder Steve Clayton atHargreaves Lansdown. "They really need to pick the crown up andget it back on their head."
Reckitt has forecast 2 to 3 percent like-for-like salesgrowth for 2018, after no growth in 2017.
The British consumer goods company was in the running forsome of the consumer health brands, including painkiller Advil,being sold by Pfizer.
Many investors saw the attractiveness of the assets, butworried about Reckitt's ability to fund and manage a deal thatcould have reached
Following news late on Wednesday that Reckitt had abandonedthe auction - after Pfizer rejected its bid for some of theassets - its shares jumped 6 percent as investors breathed asigh of relief there would be no dilutive issue of equity or newdistraction for senior management.
Since October, when Pfizer announced it was exploringoptions for its consumer health unit, Reckitt's shares hadfallen 21 percent, in part on concerns about a possible deal.
Even after Thursday's gain, the stock is only trading at 16times forecast earnings, below its five-year average of 19.
"We caution on being too optimistic over the prospects of aquick fundamental turnaround of the core businesses," saidBarclays analyst Alex Smith. "In particular, we still see toomany uncertainties around the cost and cultural change requiredto restore growth and competitiveness."
FUTURE DEALS
The Pfizer business would have made Reckitt the globalleader in consumer health, a category supported by agingpopulations and growing interest in health and wellness.Becoming a leading player there has been the long-statedstrategy of the company's chief executive, Rakesh Kapoor.
Some analysts praised Kapoor's financial discipline inwalking away from Pfizer, as it did from a deal for Merck in2014, but Bernstein's Andrew Wood was disappointed.
"When Mead Johnson is fully integrated and RB's corebusiness is back to health, we think that RB might regret havingmissed this once-in-a-decade acquisition opportunity for globalconsumer health leadership," he said.
With the consumer health market still very fragmented, therewill be opportunities to grow in future, but it will be slower.
"Ex-Pfizer, these would now either need to be gestatedorganically, or acquired more painstakingly via sequentialbolt-on deals," Jefferies analyst Martin Deboo said.
Yet, if Pfizer decides to keep its business for now, Reckittcould be in a better position in a few years' time.
"If the sale falls through altogether and they get anothercouple of years to sort the balance sheet out, maybe it will bean opportunity in the future," Hargreaves Lansdown's Claytonsaid.(Reporting by Martinne Geller; Editing by Mark Potter)
