Infant nutrition company Mead Johnson is the subject of $16.7 billion takeover from consumer goods giant Reckitt Benckiser.
The offer represents a price of $90 per share. Shares in Reckitt Benckiser peaked at £71.91 following confirmation of the talks – up from £69.68.
The company is best known for personal care products like Veet, Scholl and Durex, as well as cleaning brands such as Dettol and Cillit Bang.
The acquisition will ‘take Reckitt Benckiser in a new direction and boost its business in Asia’, Reuters reported this morning. Mead Johnson, which owns the Enfamil brand of infant nutrition formulas, has charted strong performance in its Asian and Latin American businesses in recent years.
The London-based consumer giants company confirmed that it was in ‘advanced negotiations’ for a full buyout of Mead Johnson.
“The parties are presently engaged in a period of due diligence and contract discussion. There is no certainty that any transaction will ultimately be agreed, nor as to the terms on which any transaction might occur.”
The company expects to finance the transaction through a combination of cash and debt.
Analysis: ‘a strong market for infant formula’
The opportunities for foreign dairy brands to perform well in Asia – particularly China – are well-documented. Ever since the country’s melamine crisis in 2008, consumer confidence in domestically produced dairy has been insurmountably low. Chinese companies like Yashili and Yili have sought to reduce their losses by investing in Australian and New Zealand-made infant formula, while European companies like Danone have capitalised on favourable perceptions of their brands.
Reckitt Benckiser’s products are household names in the UK and Europe, but its $16 billion takeover of Mead Johnson will allow it to expand its business into Asia. The region accounted for exactly half of Mead Johnson’s sales in the year to December. But according to its full-year report, published at the end of last month, Mead Johnson’s overall revenue fell by 9% – mainly the result of strategic investments to reshape the business’ product portfolio and channel mix in China and Hong Kong.
The country remains a strong market for infant formula, driven by product innovation and a preference towards imported premium products. Food safety remains a key motivator for Chinese consumers, especially when it comes to their children.
Mead Johnson released its own statement, which read: “The company confirms that it is in discussions with RB with respect to its proposal to acquire the outstanding shares of Mead Johnson Nutrition for $90 per share in cash.
“Mead Johnson notes that no agreement has been completed, and there are no assurances that any transaction will result from these discussions. The company does not intend to make any additional comments regarding this matter unless, and until, a formal agreement has been reached or discussions have been terminated.
“Mead Johnson remains committed to doing what is best for its shareholders, employees and, as always, the children, families and health care professionals around the world who trust and depend on its products and expertise.
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