Reckitt Benckiser in Talks to Buy Mead Johnson
UK consumer goods company Reckitt Benckiser is in advanced negotiations to buy US-based Mead Johnson Nutrition in a deal valued at $16.7 billion. The acquisition would take the Slough, England-headquartered group into the baby formula market and boost its business outside Europe.
Reckitt has confirmed it has made a cash offer of $90 per share and said the parties “are presently engaged in a period of due diligence and contract discussion.” Mead Johnson added that “no agreement has been completed and there are no assurances that any transaction will result from these discussions.”
In addition to its US base, Mead Johnson has a big presence in China and Latin America and is the world’s second largest maker of baby milk with its Enfamil brand. However, the company has seen its share price shrink by a third over the past two years, as a result of slowing sales and shrinking market share, particularly in China, its biggest market where intense local competition and shifting buying habits have proved challenging.
The Glenview, Illinois-based nutrition specialist has been viewed as a possible takeover target since its spin-off from drugmaker Bristol-Myers Squibb in 2009. Past rumors have centered on French group Danone as a potential buyer. However, Danone spent $10.4 billion last summer to acquire WhiteWave, a Colorado-based maker of natural beverages and organic food, making a counter-bid unlikely.
Some analysts voiced their surprise at Reckitt’s bid for Mead Johnson, saying the UK firm is not an obvious buyer, although its focus on consumer health products makes the deal logical and the absence of any product overlap would keep antitrust scrutiny to a minimum. The market has also speculated that other bids could surface, with Nestle seen as a possibility. However, the Swiss group’s existing baby formula business would likely raise antitrust concerns.
Reckitt has been searching for a big acquisition for some time. The UK-listed company lost out to Bayer in the race to acquire US Merck’s consumer care business in 2014 and CEO Rakesh Kappor said last November that Reckitt could be “very interested” in Pfizer’s consumer health division if it went up for sale.
