Reckitt Benckiser Group Plc said late Wednesday that it was in advanced talks to buy Mead Johnson Nutrition Co. (NYSE: MJN), a U.S pediatric nutrition company, in a $16.7 billion deal.
Reckitt is well-known for its Nurofen tablets, Scholl foot-care, and Lysol cleaning products. The company said that it is negotiating to buy Mead Johnson for $90 per share in cash. The deal, if succeeds, will be the second-biggest acquisition by a British company since Brexit vote. The price represents a 17 times multiple of Mead Johnson’s estimated EBITDA in 2017, and the premium is reasonable, in line with other recent deals.
The acquisition will also be Reckitt’s biggest deal ever, which is $3.2 billion more than the price of acquiring SSL. Reckitt said that a further announcement will be made, and “the parties are presently engaged in a period of due diligence and contract discussion”.
Mead Johnson, which is the world’s No.2 infant formula maker and is famous for its Enfamil brand, confirmed the talks.
After the talk, shares of Mead Johnson increased 26% in early trading in the United States, and Reckitt’s shares were also up 5.3% in London. “The shares are up because the deal as mooted is likely to be meaningfully EPS enhancing,” said Philip Haworth, the investment manager at Kames Capital.