Reckitt Benckiser to Buy Mead Johnson for $16.6 Billion -- Update

By Tapan Panchal

British consumer-goods company Reckitt Benckiser Group PLC on Friday said it would buy baby-food maker Mead Johnson Nutrition Co. for $16.6 billion in a cash deal that would allow it to push further into the healthy-products arena.

The U.K. company, which had said earlier this month that it was in talks with the U.S. firm, said it would pay $90 a share. Including debt the deal is valued at $17.9 billion.

Mead Johnson, based in Glenview, Ill., makes a range of nutritional products including Enfamil infant formula and the Sustagen milk supplement for children.

Reckitt, based in Slough, England, owns consumer brands such as Lysol cleaning spray, Durex condoms, Strepsils lozenges and Scholl footcare products.

Separately, Reckitt reported 2016 earnings growth and said it expects macro conditions in 2017 to remain challenging and existing headwinds to persist in the first half of the new year. Full-year net profit rose 5% to GBP1.83 billion ($2.29 billion).

The acquisition of Mead Johnson will 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.

Reckitt said the purchase price represents a premium of 29% on Mead Johnson's share price before speculation of a possible deal.

It expects the deal to boost earnings in the first full year following completion and generate costs savings of about GBP200 million by the end of the third full year following completion, mostly by removing duplication in back office functions and enhanced scale when buying raw and packaging materials.

Write to Tapan Panchal at Tapan.Panchal@wsj.com

(END) Dow Jones Newswires

February 10, 2017 02:56 ET (07:56 GMT)

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