Reckitt Benckiser incurs US$3.05bn loss following sale underperforming China infant formula business

CHINA – Reckitt Benckiser Group, a British consumer health, nutrition, and hygiene company,  has signed an agreement to offload its Infant Formula and Child Nutrition (IFCN) business in China to private equity firm Primavera Capital Group for $2.2 billion (US$2.68bn).

Following the sale, Primavera Capital Group will own IFCN’s brands in China and also assume control of manufacturing plants in Nijmegen, the Netherlands and Guangzhou, China.


Sale transaction terms also give Primavera a royalty-free perpetual and exclusive licence of the Mead Johnson and Enfa family of brands (which includes Enfinitas, Enfamil and Enfagrow) in China.

Reckitt will however continue to own and operate these brands throughout the rest of the world.

Following the deal, Reckitt will retain an 8% stake in the business and anticipates net cash proceeds from the divestiture to be around US$1.3 billion.

A US$3.05bn loss


The company however expects to incur a net loss of around £2.5 billion (about US$3.05bn) from the disposal of the division, mainly due to the re-measurement of goodwill and intangible assets.

Reckitt had already written £5billion (US$6.10bn) off the value of its baby milk business last year, around a third of its book value, before snipping another £985million off in February.

This means the decision to buy Mead Johnson four years ago has, so far, cost Reckitt a whopping £8.5billion (US$10.36bn).

Reckitt acquired the business as part of its US$17.9 billion (US$21.82bn) takeover of Mead Johnson in 2017 and at the time, it was considered a timely boost in a number of key markets, including the US and Asia.

The maker of Dettol and Durex had hoped that its second biggest market – China – will be significantly strengthened by the deal.


Reckitt hoped to exploit changing consumer habits in China in light of the country’s decision to scrap its one child policy.

Poor performance of the Chinese unit however disappointed Reckitt forcing the British consumer packaged goods giant to launch a strategic review of the business leading to its eventual sale.

As at the time of sale, Reckitt’s infant formula business in China represented 6 per cent of group sales of almost £14billion (US$ 17.07bn).

 “Today’s announcement marks another step in our strategy to rejuvenate growth and create long term value. As part of this journey, we are actively, and decisively, managing our portfolio,” Reckitt Benckiser CEO, Laxman Narasimhan, said.

“After a thorough review of our infant formula and nutrition business in China, we have found an excellent home for the business under the ownership of Primavera.”

Fred Hu, founder and chairman of Primavera Capital Group, added: “We look forward to a strong collaboration with Reckitt, to continue to build on the heritage and strength of the Mead Johnson brand.

We have considerable experience investing and growing and expanding global brands in China. We are excited to support the business in its next phase of growth, leveraging our resources and local leadership.”

The deal, which is subject to customary conditions and regulatory approvals, is expected to be completed in the second half of 2021.

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