Reckitt Benckiser in talks to buy Mead Johnson for $16.7 billion

Thu Feb 2, 2017 11:13am EST
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By Martinne Geller

(Reuters) - Reckitt Benckiser Group Plc (RB.L: Quote) is in advanced talks to buy Mead Johnson Nutrition Co MJN.N in a $16.7 billion deal that would take the British consumer goods maker into the baby formula market and boost its business outside Europe.

Best known for its Lysol cleaners, Durex condoms, Nurofen tablets and Scholl footcare products, Reckitt said late on Wednesday it was discussing a $90 per share cash offer, a 29.5 percent premium to Mead's closing price.

Mead shares were up 24 percent at $86.39 on Thursday in New York. In London, Reckitt shares were up 4 percent at 7,102 pence, as enthusiasm over the deal's potential to lift profits overshadowed questions around price and strategy for going up against tough rivals Nestle (NESN.S: Quote) and Danone (DANO.PA: Quote).

"The shares are up because the deal as mooted is likely to be meaningfully EPS (earnings per share) enhancing," said Philip Haworth, investment manager at Kames Capital, which owns Reckitt shares.

"That alone doesn't mean it is a good deal but management at RB have earned the right to be given the benefit of the doubt and to explain the strategic benefits to shareholders."

A deal would be the latest in a series involving UK companies since the year began, as they consider options following the country's vote to leave the European Union.

Reckitt said "the parties are presently engaged in a period of due diligence and contract discussion". It said a further announcement would be made as appropriate.

Mead, which also confirmed the talks, is the world's No. 2 infant formula maker with its Enfamil brand. It was spun off from U.S. drugmaker Bristol-Myers Squibb (BMY.N: Quote) in 2009.   Continued...

Products produced by Reckitt Benckiser; Vanish, Finish, Dettol and Harpic, are seen in London February 12, 2008.   REUTERS/Stephen Hird/File Photo