Consumer goods manufacturing firm,Reckitt Benckiser (RB.L) has agreed to buy U.S. baby formula maker Mead Johnson Nutrition (MJN.N) for $16.6 billion, giving the British consumer goods company a new product line and expanding its presence in developing markets.
Reckitt, the maker of Lysol cleaners, Durex condoms and Mucinex cold medicine, said on Friday it will pay $90 in cash for Mead Johnson shares, a 30 percent premium to their closing price the day before Reckitt said it was in advanced talks with the maker of Enfamil baby formula, Reuters reports.
Including Mead Johnson’s debt, the deal is worth $17.9 billion and Reckitt Benckiser said it would finance the acquisition with debt underwritten by Bank of America Merrill Lynch, Deutsche Bank and HSBC.
Reckitt – whose business has been hurt by a safety scandal in South Korea, slowing emerging markets and a “failed” Scholl product – also reported weaker than expected sales in the fourth quarter due to declines in Europe and North America.
Still, Reckitt’s shares were little changed at 5.00 a.m. ET in London as the Mead acquisition, which is Reckitt’s biggest ever, offset the weak results.
Mead Johnson, whose shares had fallen by a third over the past two years, has lost market share in China lately due to increased competition and changing consumer habits.
The deal should add to Reckitt’s earnings in the first full year after completion and by the third year it is expected to boost earnings per share by a double-digit percentage, with 200 million pounds of annual cost savings.
Reckitt’s fourth-quarter revenue was 2.76 billion pounds, up 1 percent on a like-for-like basis, it said on Friday. Several analysts said the consensus was for growth of 1.7 percent.