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Reckitt Benckiser is considering the sale of its subsidiary, Mead Johnson Nutritionals, which is based in China. It was said that the British multinational consumer goods company is eyeing at least $2 billion for the deal.
Sources who have knowledge on the matter told Reuters that Reckitt Benckiser already hired the American financial services company, Morgan Stanley, to review its Mead Johnson infant formula unit in Greater China. The insiders were not names since the information shared is confidential.
The plans for the sale of Mead Johnson’s infant formula
Based on the report, Reckitt Benckiser could commence the sale process any time within the second quarter of this year. As soon as the bank receives feedback or recommendation from potential buyers, the sale will begin.
Then again, all the interested parties have been warned that Reckitt Benckiser has not made any definite decision yet, and business valuation could still change because of the negative effects of the COVID-19 pandemic. Moreover, in February, it was said that the company is exploring its other options on how to handle Mead Johnson’s infant formula unit.
In any case, Reckitt Benckiser acquired Mead Johnson in 2017 for $16.6 billion in 2017. The infant formula-maker gave the company billions from the sale of its leading milk brands that include Lactum, Enfapro, and Enfamil.
Why Mead Johnson is being sold
Reckitt Benckiser’s chief executive officer, Laxman Narasimhan, said that there is a big decline in sales in China which makes up 6 percent of the group sales. The reason for the dive is the closure of the Hong Kong border that is taking a long time to re-open due to coronavirus.
Also, the birth rate in one of the most populous countries in the world has gone down as well, so there is less infant to feed with the formula from Mead Johnson. Lastly, Chinese locals have been choosing to buy imported milk due to the 2008 milk contamination controversy scandal. In fact, it was noted that on China’s leading e-commerce platform, JD.Com, the top four best-selling brands of infant formula are all from foreign labels.
