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HomeFT SelectReckitt and Mead Johnson in $16.7bn deal talks

Reckitt and Mead Johnson in $16.7bn deal talks

Reckitt Benckiser, the maker of household goods including Cillit Bang and Dettol, is in advanced talks to acquire Mead Johnson in a deal that could value the maker of infant formula at about $16.7bn.

The British-based company said on Wednesday evening it had offered to pay $90 per share in cash to acquire the US nutritional products maker, a near 30 per cent premium on Mead Johnson’s closing share price before news of the talks emerged.

“The parties are presently engaged in a period of due diligence and contract discussion,” Reckitt said in a statement.

A deal with Mead Johnson would help Reckitt boost its US and Asia business at a time when some of its emerging market units have been under pressure.

Reckitt’s third-quarter earnings were hit by its operation in South Korea, where it was forced to put aside funds to compensate families whose relatives suffered illness and fatal lung injuries linked to its disinfectants sold there.

Meanwhile, slower demand in Russia has had an effect on the consumer group’s revenues.

For several years Mead Johnson, which is based in Glenview, Illinois, had been rumoured to be a target of Danone, the world’s largest yoghurt maker. But the French group ended up acquiring WhiteWave, a Colorado-based maker of high-end natural beverages and organic food, for $12.5bn last summer.

Shares in Mead Johnson, which in 2016 had annual sales worth nearly $4bn, have fallen more than 30 per cent since its 2015 highs. On Wednesday its shares closed at $69.50, valuing it at $12.9bn.

Reckitt has been actively looking to make a big acquisition for some time. The UK listed company, which has a market value of about $60bn, has been hunting for opportunities to expand its dollar-based revenues, said a person with knowledge of the company’s business plans.

Mead Johnson derives most of its revenues from Asia and the US. A smaller portion of sales are generated in Latin America.

Reckitt said it planned to finance the transaction through a combination of cash and debt, “whilst retaining a strong investment grade credit rating”.

It also stressed that there was no certainty a deal would be agreed, but people close to the companies said they were “very close”.

The Wall Street Journal first reported news of the talks.

Via FT