According to a Wall Street Journal Report, the UK-based consumer giant Reckitt Benckiser Group PLC may buy Mead Johnson Nutrition Co. This move by RB is to further a push into the healthy products area.
The deal terms are not yet clear, but Mead Johnson might eye for more than $15 billion as their current market value is $12.9 billion and their stock took a more than 30% down hit as compared to its 2015 high. The market value of Reckitt, on the other hand, is a whopping $60 billion.
This Glenview Illinois-based company makes nutritional product ranges, which include a milk supplement for children (Sustagen) and an infant formula (Enfamil). Their 2016 sales were about $3.7 billion with half of the sales coming from Asia, about 17% from Latin America, and the rest from Europe and North America.
Based in Slough, Reckitt Benckiser runs business on brands like cleaning spare Lysol, condoms (Durex), Strepsils, and foot care products by Scholl. The company had about GBP 8.9 billion in the year 2015; they haven’t yet reported their 2016 results.
When Reckitt reported their results in October, their outlook for that year lowered. In the second quarter, the guided estimates in the three months were lower and the overall report for third-quarter sales missed the estimates. As per sources, that year was the lowest growth during CEO Rakesh Kapoor’s tenure as their like for sales, which ended on September 30, rose by just 2% as compared to the last year’s same period missing the expectations of the analysts by about 70%.
The performance of Reckitt Benckiser shows how consumer goods companies based in Europe have struggled to keep up with the robust growth in sales in the tough macroeconomic conditions due to sudden currency swings and local competition. The results of Mead Johnson have also been distraught because of these currency swings.
Before Mead Johnson separated as an independent company, it was part of Bristol Myers Squibb Co., the pharmaceutical giant. To focus more on medical business, Bristol split Mead Johnson as a separate company for nutrition business in 2009. Since then, Mead Johnson has been eyed by acquirers given their exposure to the fast growing emerging markets.
This is a 100 year old company that was founded by Edward Mead Johnson in Jersey City, NJ, after leaving Johnson & Johnson. If this deal is solidified, Reckitt Benckiser will gain another valuable asset, which could potentially shoot up their annual sales to new heights. Both Mead Johnson Co and Reckitt Benckiser should negotiate the deal with utmost sincerity because when mergers of such large companies are concerned, they tend to have a global rippling effect.