Reckitt & Colman may buy back bond

Reckitt & Colman, the Harpic toilet cleaner to Lemsip group, is considering buying back its convertible bond in a novel move which could lead to a cash return to shareholders of up to pounds 350m.

Iain Dobbie, Reckitt's finance director, said repurchasing the bond was an alternative way to share out cash following changes to the tax system last autumn which have made normal share buy-backs tax inefficient.

Speaking after the company announced its half-year figures to July, Mr Dobbie said the move would allow the company to continue paying foreign income dividends.

Reckitt made a pounds 150m cash payout to shareholders last November out of foreign earnings, but said yesterday it would rather use the cash to pay FIDs while it can. The Government has threatened to abolish FIDs, which allow a company to avoid paying tax twice on foreign earnings, in 1999.

Mr Dobbie said the bond, issued in 1990 and which converts into 40 million shares in 2005, had a pounds 200m face value, but could fetch up to pounds 350m. However he said that depended on whether people were willing to sell: "Bonds are becoming increasingly attractive. Not every bond holder will want to sell."

Mr Dobbie said Reckitt would only repurchase the bond if it was tax efficient and did not attract potentially unrecoverable advance corporation tax.

The news came as Reckitt reported a 4 per cent fall in half-year sales to pounds 1.1bn after a pounds 115m currency hit.

Investment column, page 18