Reckitt Benckiser Group has signed an agreement to offload its Infant Formula and Child Nutrition (IFCN) business in China to private equity firm Primavera Capital Group for $2.2 billion.
Upon completion of the transaction, Primavera will have a royalty-free perpetual and exclusive licence of the Mead Johnson and Enfa family of brands (which includes Enfinitas, Enfamil and Enfagrow) in China. However, Reckitt will continue to own and operate these brands throughout the rest of the world.
The sale also includes the manufacturing plants in Nijmegen, the Netherlands and Guangzhou, China.
Following the deal, Reckitt will retain an 8% stake in the business and anticipates net cash proceeds from the divestiture to be around $1.3 billion.
Reckitt acquired the business as part of its $17.9 billion takeover of Mead Johnson in 2017 and its latest agreement comes after the company launched a strategic review of its IFCN China business back in February following struggling sales.
The consumer health, nutrition and hygiene company expects to incur a net loss of around £2.5 billion from the disposal of the division, mainly due to the re-measurement of goodwill and intangible assets.
Reckitt Benckiser CEO, Laxman Narasimhan, said: “Today’s announcement marks another step in our strategy to rejuvenate growth and create long term value. As part of this journey, we are actively, and decisively, managing our portfolio.
“After a thorough review of our infant formula and nutrition business in China, we have found an excellent home for the business under the ownership of Primavera. As a result of this transaction, Reckitt’s Nutrition business going forward will have a better and more consistent growth and margin profile.”
Fred Hu, founder and chairman of Primavera Capital Group, added: “We look forward to a strong collaboration with Reckitt, to continue to build on the heritage and strength of the Mead Johnson brand.
“We have considerable experience investing and growing and expanding global brands in China. We are excited to support the business in its next phase of growth, leveraging our resources and local leadership.”
The deal, which is subject to customary conditions and regulatory approvals, is expected to be completed in the second half of 2021.
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