Mead Johnson Sold in $17.9 Billion Deal
Reckitt Benckiser Group, the world’s leading consumer health and hygiene company, is acquiring Mead Johnson Nutrition Company, a global leader in infant and children’s nutrition, for $16.6 billion. Total value of the transaction is $17.9 billion including Mead Johnson’s net debt.
The Mead Johnson name has been associated with science-based infant and children’s nutrition products for over 100 years. The company’s Enfa family of brands, including Enfamil infant formula, is the world’s leading franchise in infant and children’s nutrition. Mead Johnson supplies more than 70 products in over 50 markets worldwide.
In the year ended 31 December 2016, Mead Johnson reported net sales of $3.74 billion, of which 50% were generated in Asia, 17% in Latin America and 33% in North America/Europe. On a US GAAP basis, Mead Johnson reported earnings before interest and income taxes of $819 million, earnings before income taxes of $713 million and net earnings attributable to shareholders of $545 million. On a non-US GAAP basis, Mead Johnson reported earnings before interest and income taxes of $927 million and EBITDA of $1.03 billion.
Reckitt Benckiser has operations in over 60 countries, with headquarters in London, Dubai and Amsterdam, and sales in most countries across the globe. The company employs approximately 37,000 people worldwide. Mead Johnson’s infant and children’s nutrition business increases RB’s revenues in consumer health by approximately 90%, while its global Enfa franchise becomes RB’s largest Powerbrand.
Rakesh Kapoor, chief executive of Reckitt Benckiser, comments: “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.”
He adds: “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.”
The integration of RB’s and Mead Johnson’s businesses is expected to deliver cost savings of £200 million per annum by the end of the third full year following completion. These arise principally from removing duplication in back office functions and leveraging the enhanced scale of the combined business in the procurement of raw and packaging materials, advertising and promotional expenditure and other spend. One-off costs to achieve the savings are expected to be approximately £450 million. The acquisition is expected to be accretive to adjusted diluted earnings per share in the first full year following completion and double-digit accretive by year 3.
James Cornelius, chairman of Mead Johnson, says: “First and foremost, this transaction provides tremendous value to Mead Johnson Nutrition stockholders. Additionally, relative to the future growth and development of the Mead Johnson business, Reckitt Benckiser – with its strong financial base, broad global footprint, consumer branding expertise and dynamic business model – is an ideal partner. I have been part of the journey of Mead Johnson Nutrition from its days as an operating division of Bristol-Myers Squibb through the past eight years as an independent public company and now into this powerful new business combination. I fully expect Mead Johnson to flourish as an important new part of the RB organisation.”
