Reckitt Benckiser Group PLC is in talks to buy baby formula maker Mead Johnson Nutrition Co for about US$16.7 billion, the latest push by the Durex condom seller to build on its faster growing consumer health business and bolster its presence in Asian markets.
The companies are discussing an offer of US$90 a share in cash, Reckitt Benckiser said on Wednesday. That would represent a 29 percent premium to Mead Johnson’s closing stock price on Wednesday.
Reckitt Benckiser, based in Slough, England, would finance the deal with cash and debt.
Photo: Reuters
Mead Johnson soared 24 percent to US$86 in after-hours trading in the US, while Reckitt Benckiser traded 0.3 percent lower to US$17.47.
The acquisition would let Reckitt Benckiser, valued at US$56 billion, add formula to a portfolio of consumer brands that includes Lysol cleaning products.
CEO Rakesh Kapoor has held off on big deals in the past few years, though he has always been on the lookout, after telling Bloomberg News late in 2015 that he could be interested in Pfizer Inc’s consumer-health unit.
Kapoor has turned more to over-the-counter health products, with brands such as Mucinex and Scholl, for growth, with the home and personal-care divisions expanding more slowly. Hygiene represents about 40 percent of Reckitt Benckiser’s sales, compared with 33 percent for health, according to Bloomberg Intelligence.
Glenview, Illinois-based Mead Johnson trails Nestle SA and Danone SA in the baby food market, though it is second only to Nestle in Asia, the biggest market, according to Bloomberg Intelligence.
Globally, Mead Johnson had a 10 percent share of the baby food market last year, researcher Euromonitor International said.
Mead Johnson confirmed the discussions in a separate statement, and both companies said there is no certainty that any transaction will ultimately be agreed on.
Baby food will likely be one of Asia’s fastest-growing food categories, even as the industry contends with near-term headwinds, Bloomberg Intelligence said in December.
The category’s growth in China might be hurt by smaller baby-food makers slashing prices over the coming year, the note said.
Over the long term, China’s two-child policy will increase spending on formula, while demand in Southeast Asian countries — including Indonesia and Vietnam — will also likely climb as more women enter the workforce, according to Bloomberg Intelligence.
Last year, about half of Mead Johnson’s total sales of US$3.7 billion came from Asia.
The deal would be Reckitt Benckiser’s biggest-ever acquisition, surpassing its purchase of Durex condom maker SSL International PLC for about ￡2.5 billion (US$3.2 billion) in 2010, data compiled by Bloomberg showed.
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