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Oh Baby! RB To Buy Mead Johnson

February 10, 2017

To pay $16.6 billion for maker of Enfamil.

What can a fast-moving consumer goods company do when its markets just aren't moving fast enough nor its consumers doing a good job of consuming? Sign up new customers when they are young...very young.

RB, the maker of such well-known brands as Lysol and Vanish, has agreed to pay $16.6 billion to acquire Mead Johnson, the baby formula maker. Including debt, the deal has been valued at $17.9 billion. RB CEO Rakesh Kapoor had been trying to do a big deal since losing out on a bid for Merck's consumer product business in 2014. This acquisition will nearly double the size of RB's consumer-health business and help it push deeper into emerging markets, where malnutrition is a critical issue in many countries.

"Our strategy is about healthier lives and homes,” said Kapoor. “Their mission is about enabling healthier lives from the very beginning.”

According to RB the child nutrition category is projected to grow sales by 3% to 5% over the medium to long term.

Mead
reported net sales of $3.7 billion in 2016, down 8%. Half the company’s sales came from Asia, with 17% coming from Latin America and the rest from North America and Europe.

The deal will turn China into Reckitt’s second-biggest market, increasing its emerging-markets footprint by two-thirds. The deal will also significantly boost the company’s exposure to the US, which remains its No. 1 market.