Reckitt Benckiser vs. Bayer: Having VMS in the product portfolio good insurance for future growth

NEW YORK — Reckitt Benckiser on Friday made an offer to acquire all of the outstanding shares of VMS maker Schiff Nutrition for $42 per share in cash, or approximately $1.4 billion — a premium of 23.5% more than the $34 per share offer Bayer HealthCare announced Oct. 30. 

Think that'll be the final offer? Not a chance if you consider the outcome of the most recent presidential election — ObamaCare's here to stay, and that means any business that trades on well care over sick care is a good business to be in. 

Think about it. With health insurance mandates kicking in beginning in 2014, insurers who generate a larger base of healthier patients are going to be able to realize friendlier margins. In other words, the fewer claims you have to pay out because your coverage base is relatively healthy, the greater proportion of the premiums fall to the bottom line. 

So like the vanishing deductibles touted by Nationwide that the auto insurer ties to safe driving, expect health insurers to similarly drive better health behaviors. Don't smoke. Eat right. And for the love of McDonald's, take your vitamins. 

Not convinced? It was only a few months ago that DSN suggested VMS had become the hotbed for merger and acquisition activity because of the potential of the category. Procter & Gamble had finished its purchase of an entire supplement platform with its acquisition of New Chapter, and then Church & Dwight came onto the M&A scene with its acquisition of gummy vitamin manufacturer Avid Health. 

And the executives leading those companies are already tapping into some pretty significant synergies. "Gummy vitamins represent about 58% of all children vitamin sales today with only about 3% of the adult vitamin category," C&D CEO James Craigie excitedly told analysts. "However, the total adult vitamin category is about 19 times [the] size of the kids’ vitamins — or about $5 billion. So we are confident there is a huge opportunity to grow the gummy form in adult vitamins. … That growth has already happened as we speak, as the gummy form is the fastest-growing segment of both kids' and adult vitamins."

Still not convinced? 

"On a stand-alone basis, Schiff is planning more than $370 million in sales in fiscal year 2013. The relevant market is growing at 6% per annum," Bayer CEO Marijn Dekkers told analysts in October, just after he said, "Schiff's products will effectively complement our existing OTC portfolio. One example is the possible interplay between Aleve to relieve acute joint and muscle pain and Move Free to support joint health."

That's the play a lot of traditional OTC companies appear to be reaching for. Sure, have the acute care solution at the ready because when people are in pain, they will buy pain relief. But if the overriding consumer focus favors never needing that pain reliever in the first place, it may be a good idea to have that preventive offering as part of the product portfolio, too.