Reckitt's Cleaning Portfolio Sale in Jeopardy Amid Slowdown in Private Equity Deals

The sale of Reckitt Benckiser Group PLC’s (LSE: RKB.L) iconic cleaning products division—home to brands like Air Wick, Calgon, and Dettol—has hit a critical snag as private equity (PE) market volatility casts doubt over its completion by year-end. Announced in July 2024 as part of a strategic pivot to high-margin “powerbrands,” the sale now faces delays, valuation cuts, and shifting investor sentiment.

The Sale’s Fragile Progress

Reckitt had initially targeted a valuation of £6 billion for the division, but negotiations have since stalled, with the price now slashed to £3–4 billion—a 33–50% haircut. Key bidders Advent and Lone Star remain in talks, but Apollo Global’s withdrawal from final negotiations has reduced competitive pressure. Market turbulence, including a 18% year-on-year decline in global M&A activity, has further dampened buyer enthusiasm.

The division, part of Reckitt’s Essential Home portfolio, reported a 7% drop in like-for-like sales during Q1 2025, exacerbating concerns over its profitability. Meanwhile, macroeconomic headwinds—such as rising interest rates and U.S. tariffs on Chinese imports—have strained margins, prompting production shifts to North Carolina to mitigate costs.

PE Market Challenges

The slowdown in PE dealmaking is a key factor. Q1 2025 saw the lowest U.S. PE deal count since Q2 2020, despite a surge in high-value transactions. While $1 billion+ deals rose to 37% of total activity, smaller and mid-sized buyouts—like Reckitt’s cleaning division—face weaker demand. Buyers are increasingly cautious, with purchase price multiples for leveraged buyouts (LBOs) climbing to 11.7x EBITDA amid reduced competition.

Legal and Operational Risks

Beyond market conditions, Reckitt’s legal overhang poses a further hurdle. The company faces litigation over Mead Johnson Nutrition’s Enfamil infant formula lawsuits, which could divert resources or deter buyers. While the legal issues are confined to a separate division, uncertainty persists. Additionally, U.S. tariffs on Chinese imports have strained supply chains, prompting operational adjustments that add to execution risks.

Investor Sentiment: Bulls vs. Bears

Bulls argue that Reckitt’s core powerbrands—such as Vanish and Dettol—delivered 5% organic sales growth in Q1 2025, outpacing the struggling cleaning division. They see the sale as critical to unlocking capital for reinvestment and improving operational focus.

Bears, however, highlight the stock’s 12% year-to-date decline to £58 as of May 2025, down from £70 in early 2024. Delays or a prolonged sale process could jeopardize 2025 restructuring targets, especially if valuation pressures persist.

Outlook and Key Metrics to Monitor

Reckitt remains committed to finalizing the sale by December 2025, but success hinges on two critical factors:
1. Legal Resolution: A settlement in the Enfamil litigation before year-end would remove a major uncertainty.
2. Market Conditions: A rebound in global M&A activity or easing interest rates could revive buyer interest.

Even a £3 billion valuation would unlock significant capital, but investors will watch for signs of buyer reengagement and Reckitt’s ability to navigate tariffs and litigation.

Conclusion

Reckitt’s cleaning portfolio sale is in limbo, with material risks to its timeline and final terms. While the valuation haircut and macroeconomic headwinds are concerning, the company’s strategic focus on high-growth brands remains intact. Investors should closely monitor RKB.L’s stock performance, litigation updates, and any signs of PE buyer reengagement. With £3–4 billion still on the table, the deal could proceed—albeit at a slower pace—but the path ahead remains fraught with uncertainty.

As of May 2025, the sale’s success depends on balancing external pressures with Reckitt’s execution discipline. For now, the iconic brands of Air Wick and Dettol hang in the balance, awaiting clarity in a volatile market.