Reckitt Benckiser plans to acquire Mead Johnson for $16.7B

British consumer goods company Reckitt Benckiser has expressed interest in acquiring baby formula manufacturer Mead Johnson with a proposal value for the latter company at $90 per share or $16.7 billion to be paid for in cash and debt. The offer made by RB was a 29.5% premium to Mead Johnson’s closing price.

Although Mead Johnson has also confirmed that it is currently in talks with RB regarding the acquisition proposal, there is still no formal completion or assurance of the agreement set by the two companies. Presently, the companies have not given any final decision towards the proposed acquisition.

“The parties are presently engaged in a period of due diligence and contract discussion,” Mead Johnson stated on its news release.

Reckitt Benckiser is known for its cleaning and over-the-counter products like Durex, Nurofen, Lyson and Scholl, while Mead Johnson makes Enfamil baby formula products.

It is said that the transaction is aimed at improving Reckitt Benckiser’s consumer brands portfolio, which currently includes Dettol cleaning products, Strepsils lozenges, Scholl footcare products and Durex condoms.

Should the deal go through, it is anticipated that the combination would allow RB to push through to a better health products business especially in the US and Asian regions. The British company would also have a better position in the baby foods market. RB’s health care products currently accounts for the company’s 33% of total sales.

Since RB CEO Rakesh Kapoor took office in 2011, he has made part of his goals for the company to acquire various companies in order to expand the company’s market presence.

Reckitt Benckiser’s shares have surged on Thursday trading, opening at $6,950, and reaching a high of $7,195 and climbing almost 4.6% in the market.

Meanwhile, Mead Johnson shares also soared upon the announcement of the proposal acquisition, climbing as much as 23.7% to $84 in the stock market.

Back in March, Mead share plunged after its proposal to acquire French nutrition company Danone was scrapped since the French company announced a $12.5 billion deal with WhiteWave Foods co. 

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