The British parent company of the top-selling condom globally is poised to acquire the company known for the world’s leading infant formula brand.
In the wee hours of Friday morning, Glenview-based Mead Johnson Nutrition, producer of Enfamil infant formula, announced it reached an agreement to be acquired by Reckitt Benckiser, maker of Durex condoms and Lysol, for about $16.6 billion, or $90 a share, pending shareholder and regulatory approval. The deal is valued at about $18 billion, including net debt, and is expected to close in the third quarter of this year.
Mead Johnson will still move its headquarters to Chicago’s River Point skyscraper next month, as previously announced, where it will occupy three floors. But the impact of the deal on Mead Johnson’s 170 or so employees in the Chicago area isn’t yet clear.
The merger is expected to produce some $250 million in annual cost savings by the third year, but the majority of the savings for the combined company will come from consolidating overhead costs and achieving supply chain efficiencies, said Raul Damas, a Reckitt Benckiser spokesman.
"Regarding workforce, we can’t provide more detail at this stage, but a key part of the deal rationale is acquiring Mead Johnson’s experience and expertise, and investing in Mead Johnson’s (research and development) and regulatory functions. The synergies are not driven by workforce reductions," Damas said in an email.
Both companies confirmed they were in advanced negotiations last week.
For Reckitt Benckiser, which also boasts brands such as French’s mustard and Woolite detergent, the acquisition of Mead Johnson represents its largest deal ever and an opportunity to grow top-line sales, particularly in emerging markets in Asia.
For Mead Johnson, the deal represents a closing chapter to years of takeover speculation, though few, if any, analysts saw Reckitt Benckiser coming. More recently, industry rumors had pegged Nestle and Danone, the first and second largest suppliers of baby food globally, as the firms mostly likely to acquire Mead Johnson, which is the third largest supplier of baby food, according to data from Euromonitor International.
Zain Akbari, a Morningstar analyst, said in a research note Friday that he doubted the tie-up would run into antitrust regulatory concerns as there’s little overlap in the two companies. He also considered it unlikely that another suitor would come forward with a counteroffer.
In March, Danone was rumored to be in the hunt for Mead, but then its $12.5 billion acquisition of Colorado-based WhiteWave Foods, announced in July but pending regulatory approval, effectively scuttled such talk.
Although not previously considered by analysts to be an obvious acquirer of Mead Johnson, Reckitt Benckiser has had the U.S. company on its radar for a number of years, CEO Rakesh Kapoor said Friday morning on a conference call.
The debt-funded acquisition will add to per-share earnings in the first full year and will be "double-digit accretive" by the third year, Reckitt Benckiser said.
Mead Johnson stock soared in midmorning trading Friday, up almost 5 percent to $87.20 per share.
Associated Press contributed.
gtrotter@chicagotribune.com
Twitter @GregTrotterTrib
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