{"id":21883,"date":"2017-02-11T07:03:48","date_gmt":"2017-02-11T07:03:48","guid":{"rendered":"http:\/\/www.biphoo.com\/bipnews\/?p=21883"},"modified":"2017-02-11T07:04:19","modified_gmt":"2017-02-11T07:04:19","slug":"reckitt-finalizes-deal-to-buy-mead-johnson-for-16-6-billion","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/business\/reckitt-finalizes-deal-to-buy-mead-johnson-for-16-6-billion.html","title":{"rendered":"Reckitt finalizes deal to buy Mead Johnson for $16.6 billion"},"content":{"rendered":"

\n\tReckitt finalizes deal to buy Mead Johnson for $16.6 billion<\/span><\/span><\/strong><\/span>
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\n\tReckitt finalizes deal to buy Mead Johnson for $16.6 billion:- 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.<\/span><\/span><\/span>\n<\/p>\n

\n\tReckitt, 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 close on Wednesday last week, the day before Reckitt said it was in advanced talks with the maker of Enfamil baby formula.<\/span><\/span><\/span>\n<\/p>\n

\n\tIncluding 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.<\/span><\/span><\/span>\n<\/p>\n

\n\tReckitt – 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.<\/span><\/span><\/span>\n<\/p>\n

\n\tThe company also forecast 2017 sales growth below some analyst estimates, citing the ongoing impact of those issues and a challenging macroeconomic backdrop.<\/span><\/span><\/span>\n<\/p>\n

\n\tReckitt's shares were down 2 percent at 1542 GMT in London, while Mead Johnson was up 5 percent at $87.2 in New York.<\/span><\/span><\/span>\n<\/p>\n

\n\tINFLECTION POINT<\/span><\/span><\/span>\n<\/p>\n

\n\tReckitt Chief Executive Rakesh Kapoor said the deal was "a significant inflection point" for the company, as its biggest acquisition will nearly double the size of Reckitt's faster-growing consumer health business and expand its developing market presence by two-thirds.<\/span><\/span><\/span>\n<\/p>\n

\n\tChina will become Reckitt's second-largest market behind the United States following the acquisition of Mead Johnson, which was spun off from Bristol-Myers Squibb (BMY.N) in 2009.<\/span><\/span><\/span>\n<\/p>\n

\n\tMead has long been seen as a potential takeover target for Danone (DANO.PA) or Nestle (NESN.S), but not Reckitt, since the British company has never been in the baby formula market.<\/span><\/span><\/span>\n<\/p>\n

\n\t"You might be surprised but we are absolutely not surprised. We've been looking at this for a number of years now as we have indeed other companies," Kapoor told reporters.<\/span><\/span><\/span>\n<\/p>\n

\n\tStill, analysts saw the choice of Mead Johnson as proof that other, more obvious deals were unavailable in areas Reckitt has been targeting such as over-the-counter medicines.<\/span><\/span><\/span>\n<\/p>\n

\n\t"The deal would seem to tick the 'financial logic' rather better than the 'strategic logic', but opens up a lot of opportunities in a very attractive category," said analysts at Credit Suisse.<\/span><\/span><\/span>\n<\/p>\n

\n\tMead Johnson's shares had fallen by a third over the past two years, as it has lost market share in China due to increased competition and changing consumer habits.<\/span><\/span><\/span>\n<\/p>\n

\n\tSteve Clayton, manager of the HL Select UK Shares fund at Hargreaves Lansdown, which owns shares of Reckitt, said the poor performance was a risk.<\/span><\/span><\/span>\n<\/p>\n

\n\t"But building brands and raising performance is stock-in-trade for RB, and the growth potential for infant milk sales is exciting, especially in the emerging markets," Clayton said.<\/span><\/span><\/span>\n<\/p>\n

\n\tEARNINGS BOOST<\/span><\/span><\/span>\n<\/p>\n

\n\tReckitt said its goal was for the Mead business to perform at the upper end of an estimated annual sector growth rate of 3 to 5 percent in the medium to long term.<\/span><\/span><\/span>\n<\/p>\n

\n\tThe 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.<\/span><\/span><\/span>\n<\/p>\n

\n\tKapoor said there been no talks yet about job losses at the combined businesses and no decision had been taken regarding six Mead Johnson executives, who would be owed a total of $31.7 million if they were let go within two years of a takeover.<\/span><\/span><\/span>\n<\/p>\n

\n\tReckitt'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.<\/span><\/span><\/span>\n<\/p>\n

\n\tFor the full year, like-for-like revenue rose 3 percent and reported earnings climbed 6 percent to 256.5 pence per share.<\/span><\/span><\/span>\n<\/p>\n

\n\tReckitt forecast like-for-like sales growth of 3 percent on a stand-alone basis for 2017, below analyst expectations, and reiterated a medium-term target of "moderate" margin expansion.<\/span><\/span><\/span>\n<\/p>\n

\n\tThe company said the issues that hurt it in 2016 would persist into the first half of 2017.<\/span><\/span><\/span>\n<\/p>\n

\n\tSubject to shareholder and regulatory approvals, Reckitt expects the Mead Johnson deal to close by the end of the third quarter. The British company said it expected to retain a strong investment grade credit rating following the deal.<\/span><\/span><\/span>\n<\/p>\n

\n\tRobey Warshaw and Bank of America Merrill Lynch were Reckitt's lead financial advisers, while Deutsche Bank was a financial adviser, corporate broker and sponsor. HSBC was also an adviser to Reckitt. Mead Johnson was advised by Morgan Stanley and Goldman Sachs.<\/span><\/span><\/span>\n<\/p>\n

\n\tSource:- http:\/\/www.reuters.com\/article\/us-mead-johnson-m-a-reckitt-benc-grp-idUSKBN15P0MV<\/span><\/span><\/span><\/p>\n

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