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Reckitt Benckiser's Kapoor to retire after eight years in charge

Published 16/01/2019, 11:21
Updated 16/01/2019, 11:21
© Reuters. Rakesh Kapoor, the CEO of Reckitt Benckiser, poses for a photograph at the company headquarters in Slough

© Reuters. Rakesh Kapoor, the CEO of Reckitt Benckiser, poses for a photograph at the company headquarters in Slough

By Noor Zainab Hussain and Martinne Geller

(Reuters) - Reckitt Benckiser (L:RB) Chief Executive Rakesh Kapoor will retire this year, paving the way for a potential change in strategy or break-up of the British consumer goods maker.

The company behind Durex condoms and Enfamil infant formula said Kapoor, 60, would leave by the end of 2019 after more than eight years at the helm and more than three decades with the company overall.

Reckitt has begun looking for a successor and will consider internal and external candidates.

Indian-born Kapoor is the latest consumer industry chief to hand over the reins in difficult times, marked by slower growth, little pricing power and changing consumer habits.

Unilever (L:ULVR), Campbell Soup (N:CPB) and PepsiCo (O:PEP) have all named new bosses in recent months.

Through a series of deals, Kapoor sought to transform Reckitt from a British household cleaning company into a global consumer healthcare leader.

He is also the architect of a plan designed to split the firm into two stand-alone business units, one focused on health and the other on home and hygiene, but under the same parent company.

"Kapoor's departure could signal the start of plans to formally split the businesses into two separate entities," Liberum analysts said. "This could make either or both of the two businesses more attractive to prospective third parties."

Reckitt's shares, which underperformed its European staples sector by 13 percent over the last three years, were down 2.1 percent at 1040 GMT.

"The announcement ... compounds our sense of unease around RB," said Jefferies analysts. "A feeling that the success model is finding its limits and that the loss of Pfizer (NYSE:PFE) has been a mortal blow."

Kapoor pulled Reckitt out of last year's bidding for Pfizer's consumer health assets, a deal seen by many as an obvious culmination of years of feasting on smaller healthcare assets.

Another analyst on Wednesday linked the share price fall with the possibility that a new CEO could decide to limit profit margins in order to invest in boosting revenue growth.

"We think it's likely that the threat of a margin reset could spook investors and put pressure on the share price," RBC Capital Markets analysts said.

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Jefferies analyst Martin Deboo said it was tough to say who could succeed Kapoor, given Reckitt's custom of keeping second-tier managers out of the spotlight, and a unique corporate culture that can make it hard for outsiders to integrate.

He said Rob De Groot, president of the hygiene and home division, must be a lead contender, while market speculation included Stefan Heidenreich, who recently stepped down as CEO of Germany's Beiersdorf.

Kapoor, who grew from humble beginnings in the north Indian city of Bareilly, has overseen a near doubling in Reckitt's market value to 44.3 billion pounds as of Tuesday, spending heavily on acquisitions.

Over the past three years, the company has however grappled with a failed product launch, a cyber attack, a safety scandal in South Korea and a temporary baby milk factory shutdown in the Netherlands.

Kapoor had his pay cut twice in the past two years, due to company underperformance and a measure of investor dissatisfaction with a 25.5 million pound package in 2015 that made him Britain's third-highest paid boss.

GRAPHIC: Reckitt's value almost doubles under CEO Kapoor - https://tmsnrt.rs/2HgR2NL

© Reuters. Rakesh Kapoor, the CEO of Reckitt Benckiser, poses for a photograph at the company headquarters in Slough

His boldest deal was the 2017 purchase of U.S. baby formula maker Mead Johnson. It took Reckitt into a new and highly competitive area of baby formula and dramatically boosted its presence in fast-growing China.

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