Reckitt Benckiser Is in Talks to Buy Mead Johnson--Update
February 01 2017 - 6:51PM
Dow Jones News
By Dana Mattioli and Dana Cimilluca
Reckitt Benckiser Group PLC is in talks to buy baby-food maker
Mead Johnson Nutrition Co., according to people familiar with the
matter, a move that would further a push by the U.K. consumer giant
into the healthy-products arena.
Terms of the potential deal are unclear, but with a market value
of $12.9 billion Wednesday and a stock that is down more than 30%
from its 2015 high, Mead Johnson could fetch more than $15 billion
with a takeover premium. Reckitt has a market value of GBP48
billion ($60 billion). As with all such negotiations, the talks
could fall apart before a deal is reached.
Mead Johnson, based in Glenview, Ill., makes a range of
nutritional products including Enfamil infant formula and the
Sustagen milk supplement for children. It had net sales of $3.7
billion in 2016, down 8%. Half the company's sales came from Asia,
with 17% coming from Latin America and the rest from North America
and Europe.
Reckitt Benckiser, based in Slough, England, comprises consumer
brands such as Lysol cleaning spray, Durex condoms, Strepsils
lozenges and Scholl footcare products. The company, which hasn't
yet reported 2016 results, had sales of GBP8.9 billion in 2015.
If the two companies were to combine, it could breathe new life
into a push by Reckitt into higher-margin consumer-health products.
Under Chief Executive Rakesh Kapoor, who took the helm in 2011, the
company has made a string of acquisitions aimed at expanding the
business. The consumer-health unit's growth has slowed however.
In October, when it reported the results, Reckitt lowered its
outlook for the year -- the second time it had guided estimates
slightly lower in three months -- and reported overall
third-quarter sales that missed estimates. Reckitt said then that
like-for-like sales for the three months ended Sept. 30 rose by 2%
compared with the same period last year, missing the 2.8% expected
by analysts and marking the lowest growth during Mr. Kapoor's
tenure.
Reckitt's performance signals how European consumer-goods
companies have struggled to notch robust sales growth in tough
macroeconomic conditions marked by currency swings and the rise of
local competitors. Mead Johnson's results have also been hampered
by currency swings.
Mead Johnson was once part of pharmaceutical giant Bristol-Myers
Squibb Co. In 2009, Bristol split off the nutrition company to
focus on its core medical business. Mead Johnson has been the
subject of takeover speculation ever since, given its exposure to
fast-growing emerging markets and its manageable size for an
acquirer.
The company was founded more than 100 years ago in Jersey City,
N.J., by Edward Mead Johnson Sr., who started it after leaving
Johnson & Johnson, which he co-founded with his brother.
A deal would come on the heels of a $10.4 billion tie-up between
France's Danone SA and U.S. organic-foods producer WhiteWave Foods
Co., struck in July. Danone had been considered by analysts to be a
logical buyer for Mead Johnson.
A number of other substantial mergers in the consumer industry
have been announced since then, including British American Tobacco
PLC's agreement last month to take full control of Reynolds
American Inc. in a $49 billion deal. Also last month, Luxottica
Group SpA, maker of Ray-Ban sunglasses, agreed to a merger with
French optical-lens maker Essilor International SA, a tie-up that
would create a company with a combined market value of nearly $50
billion, and confectionery company Mars Inc. said it would buy
veterinary and dog-daycare company VCA Inc. in a $7.7 billion
deal.
Write to Dana Mattioli at dana.mattioli@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
February 01, 2017 18:36 ET (23:36 GMT)
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