Milk Road

10 February 2017 By Carol Ryan

The cleaning products-to-condoms group is paying $90 a share in cash for baby formula-maker Mead Johnson. Cost savings only cover about half the $3.8 billion premium. Whether it can make up the balance will depend largely on boosting sales in the People’s Republic.

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Reckitt Benckiser will buy U.S. infant formula maker Mead Johnson Nutrition for $16.6 billion. The total value of the transaction is $17.9 billion including Mead Johnson's net debt.

Reckitt, the British maker of Dettol and Vanish, said on Feb. 10 it will pay $90 a share for Mead, a roughly 30 percent premium to the stock's closing price on Feb. 1, the day before Reckitt said the two were in talks.

Reckitt said it expects global sales of infant and children's nutrition products to grow by 3 to 5 percent year. It wants Mead sales to grow at the upper end of that range.

Reckitt said it expects the purchase to deliver 200 million pounds ($250 million) in annual cost savings by the end of the third year.

Reckitt shares were up 6 pence at 7,248 pence by 1020 GMT.

Context News

Reckitt Benckiser will buy U.S. infant formula maker Mead Johnson Nutrition for $16.6 billion. The total value of the transaction is $17.9 billion including Mead Johnson's net debt.

Reckitt said it expects global sales of infant and children's nutrition products to grow by 3 to 5 percent year. It wants Mead sales to grow at the upper end of that range.

Reckitt said it expects the purchase to deliver 200 million pounds ($250 million) in annual cost savings by the end of the third year.

Reckitt shares were up 6 pence at 7,248 pence by 1020 GMT.

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