Sector News

Reckitt Benckiser in talks to buy Mead Johnson for $16.7 billion

February 2, 2017
Consumer Packaged Goods

British consumer goods maker Reckitt Benckiser Group Plc is in advanced talks to buy baby formula maker Mead Johnson Nutrition Co for $16.7 billion, in a deal that would take it in a new direction and boost its business in Asia.

Reckitt, which is best known for its cleaning and over-the-counter health products, said late on Wednesday it was in talks to offer $90 in cash for each Mead Johnson share, a 29.5 percent premium to the stock’s closing price.

Shares of Mead Johnson, long rumored to be a takeover target for Danone or Nestle , jumped 22 percent in after-market trading. At 0808 GMT (03:08 a.m. ET), Reckitt shares in London were up 3.7 percent at 7,084 pence.

Mead Johnson, which makes Enfamil baby formula, has been seen as a bid target since being spun off from drugmaker Bristol-Myers Squibb in 2009, due in part to its big presence in Latin America and Asia, regions with fast-growing populations.

Reckitt, which makes Durex condoms, Nurofen tablets, Lysol cleaners and Scholl footcare products, was not seen as an obvious buyer given it is not in the baby food business and its overall food business is very small.

Still, Reckitt’s focus on consumer health products, or health-related goods sold over the counter, makes Mead Johnson a good fit, analysts said.

“It’s a branded consumer proposition with healthcare-y attributes,” said RBC Capital Markets analysts, adding the absence of any product overlap meant antitrust scrutiny would be minimal.

Reckitt’s proposed price represents a multiple of 17 times Mead Johnson’s estimated 2017 earnings before interest, tax, depreciation and amortization (EBITDA), said analysts at Wells Fargo, falling short of the 20 times Nestle paid for Wyeth in 2012 and the 22 times Danone paid for Numico in 2007.

Still, the premium is in line with other recent consumer staples deals, and is appropriate given regulatory changes in China and price promotion, the analysts said.

Reckitt said it expected to finance the proposed deal through cash and debt.

“The parties are presently engaged in a period of due diligence and contract discussion,” it said in a statement. Mead Johnson also confirmed the discussions in a statement.

Sources told Reuters in 2014 that Danone was interested in buying Mead Johnson but the French company has since agreed to buy WhiteWave, known for its soy- and nut-based milks, reducing the chances of a counterbid.

Speculation regarding a bid by Nestle recently resurfaced after a media report citing unidentified sources, yet Nestle’s existing baby formula business would likely throw up antitrust concerns.

The Wall Street Journal first reported on the talks.

By Martinne Geller, Sruthi Shankar and Lauren Hirsch

Source: Reuters

comments closed

Related News

May 17, 2024

IFF announces CFO retirement plan

Consumer Packaged Goods

IFF has announced that its chief financial and business transformation officer, Glenn Richter, will retire on 31 December 2024, following a three-year tenure with the company. IFF has initiated the process of selecting a successor for the CFO position, considering both internal and external candidates.

May 17, 2024

Saputo’s president and CEO to depart from role

Consumer Packaged Goods

Saputo has announced that its president and CEO, Lino Saputo, will transition to the role of executive chair of the board. The transition is set to take place on 9 August, when Carl Colizza, the company’s current president and COO for North America, will assume the position.

May 17, 2024

Nestlé to invest BRL 1bn to strengthen Brazilian coffee sector

Consumer Packaged Goods

The coffee giant said the funding will be used to install new tech, such as roasting equipment, increasing production line flexibility to make new products and flavours – including higher value-added products, – and technology updates to improve sustainability.

How can we help you?

We're easy to reach