Sector News

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

February 2, 2017
Food & Drink

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

October 2, 2022

Drinktec 2022: In review

Food & Drink

In the lead-up to the world-famous Oktoberfest – which celebrates Bavarian tradition, beer and the festival spirit – Munich was already buzzing with activity by the time the doors opened to Drinktec 2022 on 12-16 September. The atmosphere was lively, with approximately 50,000 visitors from 169 countries in attendance.

October 2, 2022

Alan Jope to step down as Unilever CEO

Food & Drink

Unilever has announced CEO Alan Jope’s decision to retire from the company at the end of 2023, after five years at the helm. The announcement comes less than a year after a failed attempt by Unilever to buy GlaxoSmithKline’s consumer healthcare business and just months after activist investor Nelson Peltz joined the company’s board.

October 2, 2022

Lakeland Dairies names Colin Kelly as next group CEO

Food & Drink

Lakeland Dairies has announced that Colin Kelly will assume the role of group CEO following the retirement of Michael Hanley at the end of the year. Kelly will take up the position in January 2023, while Hanley will step down in December this year.