Reckitt Benckiser Gets U.K. Regulatory Approval to Buy K-Y Lubricants

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 [e-mail]

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