Reckitt Benckiser Is in Talks to Buy Mead Johnson--Update
February 01 2017 - 9:55PM
Dow Jones News
By Dana Mattioli and Dana Cimilluca
Reckitt Benckiser Group PLC confirmed it is in talks to buy
baby-food maker Mead Johnson Nutrition Co., a move that would
further a push by the U.K. consumer giant into the healthy-products
arena.
Reckitt announced late Wednesday that it's in advanced
negotiations to buy Mead Johnson for $90 a share, a nearly 30%
premium to the price of the stock before The Wall Street Journal
reported on the talks earlier in the day. That equates to a total
deal value of about $16.7 billion, Reckitt said. The British
company had a market value of GBP48 billion ($60 billion)
Wednesday.
The companies "are presently engaged in a period of due
diligence and contract discussion," Reckitt said. There's no
guarantee a deal will be struck, the company cautioned.
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 expectations. 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 also have 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 21:40 ET (02:40 GMT)
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