Infant nutrition company Mead Johnson has agreed to a $17.9 billion takeover from consumer goods giant Reckitt Benckiser, a week after confirming that it was in ‘advanced discussions’ with regards to a potential merger.
Reckitt Benckiser has agreed to pay $90 cash for each share of Mead Johnson’s common stock. The price includes Mead Johnson’s net debt of $1.2 billion, and represents a premium of 30% on its closing price on 1 February.
Mead Johnson chief executive officer Kasper Jakobsen said: “This transaction recognises the value of our leading brands and strong, global organisation. As part of Reckitt Benckiser, a bigger health care-focused business recognised for its marketing capabilities, we will derive benefits from both increased scale and diversification.
“We are pleased that our shareholders have an opportunity to recognise significant and immediate value and are excited for the new opportunities for our employees as part of a larger company.”
As FoodBev explained, Reckitt Benckiser was targeting Mead Johnson specifically for its performance in Asia.
London-based Reckitt Benckiser confirmed that it was in ‘advanced negotiations’ for a full buyout of Mead Johnson earlier in the month. 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 [Read more…]
Reckitt Benckiser chief executive officer Rakesh Kapoor added: “Mead Johnson’s geographic footprint significantly strengthens our position in developing markets, which account for approximately 40% of the combined group’s sales, with China becoming our second largest ‘powermarket’.
“We are confident that our deep understanding of consumer needs and our expertise in scaling global brands will deliver significant growth for the Mead Johnson portfolio. We will draw on the best of both businesses and continue to build on Mead Johnson’s extensive R&D, regulatory, quality and specialist distribution capabilities.”
‘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.
© FoodBev Media Ltd 2021
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