Known more for its range of healthcare, hygiene and homecare brands, including Dettol, Gaviscon and Strepsils, the entry of Reckitt Benckiser to the infant nutrition business is a game changer for the company as it adds the Enfa line of infant nutrition products to its business line, with an eye on the young and mothers, and on China.
The deal values Mead Johnson at US$ 17.9 billion including debt, or US$ 90 per share in cash.
“The acquisition of Mead Johnson is a significant step forward in RB’s journey as a leader in consumer health. With the Enfa family of brands, the world’s leading franchise in infant and children’s nutrition, we will provide families with vital nutritional support.
This is a natural extension to RB’s consumer health portfolio of Powerbrands, which are already trusted by millions of mothers, reinforcing the importance of health and hygiene for their families,” Rakesh Kapoor, Chief Executive Officer of Reckitt Benckiser said at the announcement of the acquisition.
“Mead Johnson’s geographic footprint significantly strengthens our position in developing markets, which will account for approximately 40% of the combined group’s sales, with China becoming our second largest Powermarket,” he continued.
Mead Johnson, based in the US a leader in the infant and children’s nutrition products category through its Enfa line of products, has been an independent public company.
At some point, it used to be an operating division of Bristol-Myers Squibb, a pharmaceutical company.
The global infant nutrition category is worth about US$46 billion in annual sales, and is expected to grow 3-5% per annum in the medium to long term.
“The acquisition of Mead Johnson complements Reckitt Benckiser’s geographic presence, increasing its developing markets scale by approximately 65%.
Developing markets will account for approximately 40% of the combined group’s sales, with a critical mass in key geographies, notably China,” says Reckitt Benckiser in a statement.
Mead Johnson has a strong presence in Asia and Latin America, from where it derives 67% of its net sales. In 2015, Mead Johnson had net sales of $1.2 billion in China.
The new business is expected to deliver cost savings of £200 million (US$ 250 million) per annum by the end of the third full year following completion, with one-off costs to achieve the savings expected to be about £450 million (US$560 million).
Reckitt Benckiser will establish an infant and children’s nutrition division, which will report directly to the CEO, post the merger. The transaction is subject to approval be regulators and shareholders of Mead Johnson.
The acquisition of Mead Johnson catapults Reckitt Benckiser to the No.3 slot, after Nestle and Danone, the two leading companies.
February 11, 2017