Reckitt Benckiser in $16.7bn takeover bid for Mead Johnson Nutrition

Reckitt Benckiser and Mead Johnson Nutrition have both confirmed that discussions are taking place over a potential takeover of the US nutrition company.

Reckitt Benckiser Group plc (RB) has confirmed it is in ‘advanced negotiations’ to acquire all Mead Johnson Nutrition shares for $90 each in cash, valuing Mead Johnson’s entire share capital at approximately $16.7bn.

Mead Johnson Nutrition (MJN), based in Fairview, Illinois, produces formula for infants and children, and includes the Enfamil brand. It has a range of 70 brands, which are sold in more than 50 countries.

RB, the UK-based health, home and hygiene company, whose brands include Lysol, Dettol, Durex, Scholl, Nurofen and Airwick, says the parties are currently engaged in a period of due diligence and contract discussion.

RB says it will finance the deal through a combination of cash and debt, and added that it is not certain that the transaction will be agreed, nor any terms.

No additional comments

Mead Johnson has been the rumored target of several takeovers, but has this time broken its silence, primarily, it says, because RB put out a statement.

In its own press release, Mead Johnson confirmed it is in discussions with RB with respect to its proposal.

The company said it will not be making any additional comments until an agreement has been reached or discussions have been terminated.

Share prices up

Mead Johnson Nutrition concluded by saying it remains committed to doing what is best for its shareholders, employees and, as always, the children, families and health care professionals around the world who trust and depend on its products and expertise.

Following the news, in after-hours trading Wednesday, Mead Johnson shares jumped to $86.00 after closing at $69.50. In the past year, shares have ranged from $66.66 and $94.40.

In early trading Thursday, RB shares rose approximately 2.4%.

Counter offers possible

Lianne van den Bos, senior food analyst at Euromonitor International, said RB’s talks with MJN will spur debate among the big milk formula players and is bound to get its fair share of counter offers.

"The likes of Nestlé and Abbott Laboratories Inc are possible contenders whilst Danone has no choice but to watch its competitors close in as its recent acquisition of WhiteWave makes this baby too big to swallow," van den Bos said.

"Whilst Nestlé will be bound to divestitures in the US with combined shares getting close to the 50% threshold, in China a takeover will create a very big distance between Danone, Abbott and Yili. With China expected to drive half of global growth in milk formula in the next five years, this is a battle worth fighting and a solid reason why a company with hardly any stake in packaged food would want to venture out."

According to Euromonitor International figures, MJN is the third biggest company in the global baby food market, behind only Groupe Danone and Nestlé. 

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