Mead Johnson Nutrition, the Glenview-based maker of Enfamil infant formula, might be acquired by the British firm Reckitt Benckiser for about $16.7 billion.
Reckitt Benckiser issued a statement overnight saying it was in advanced negotiations to acquire Mead Johnson, which issued its own release confirming the discussions. Reckitt Benckiser’s brands include Lysol disinfectant, Woolite detergent and Durex condoms.
That Mead Johnson is on the brink of a merger will come as no surprise to food industry analysts who have long pegged the global baby food-maker as a takeover target. But Reckitt Benckiser is a dark horse that few, if any, saw coming.
In just the past few weeks, rumors surfaced of Nestle buying Mead Johnson, though some analysts considered companies like Danone and even Kraft Heinz to be possible suitors.
It’s unclear what would become of the 200 or so workers at Mead Johnson’s Glenview headquarters if the deal goes through. A Mead Johnson spokesman couldn’t be immediately reached for comment.
Mead Johnson is the third-largest supplier of baby food globally, behind Nestle and Danone, respectively, according to Euromonitor data.
Pablo Zuanic, analyst with Susquehanna International Group, said in a research note Thursday that while he didn’t see Reckitt Benckiser coming, the bid makes a lot of sense, as the British firm has recently tried to diversify its portfolio away from low-growth household cleaners. Under former CEO Bart Bech, the company expanded into over-the-counter drugs and condoms, and more recently under CEO Rakesh Kapoor, made acquisitions of vitamins and supplements brands, Zuanic noted.
This acquisition would be the largest of the past 10 years for Reckitt Benckiser, and with both companies issuing statements on negotiations, "we think this is for the most part a done deal," Zuanic said.
Since its 2009 initial public offering, Mead Johnson has been considered an attractive target for acquisition, mostly because it’s a pure-play infant formula company with high profit margins that has a strong grip on a protected market in the U.S. and a growing presence in Asia.
In the U.S., the competitive market for infant formula largely is determined by which companies secure state contracts with the Women, Infants and Children program, through which federal grants are awarded to states to provide nutritional assistance to low-income women and their children. Mead Johnson has that contract in Illinois and other states.
Last 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.
Mead Johnson stock soared almost 24 percent in Thursday morning trading, selling at about $86 per share.
More to come.
gtrotter@chicagotribune.com
Twitter: @GregTrotterTrib
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