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China baby boom seen as key to Reckitt's U.S. deal

Friday, February 10, 2017 - 01:31

Reckitt Benckiser has agreed to buy U.S. baby formula maker Mead Johnson Nutrition for $16.6 billion, taking the British consumer goods company into a new area and expanding its presence in developing markets. Ciara Lee reports

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China's decision to lift its one child policy has seen birth rates rise to their highest in nearly two decades. And as demand for food, clothes and medicine grows, so too do the investment opportunities. Reckitt Benckiser may be eyeing those as it agrees to buy U.S. baby formula maker Mead Johnson Nutrition for $16.6 billion. It takes the British consumer goods company into a new area, and potentially throws up a few challenges. (SOUNDBITE) (English) MICHAEL HEWSON, CHIEF MARKET ANALYST AT CMC MARKETS, SAYING: "There is an element of logic to it, but I still think their are competition concerns. Not withstanding the fact that ultimately in the U.S. and Mexico, the combined market share of Reckitt Benckiser and Mead Johnson will be significantly higher than it is now. I think there are concerns that Chinese regulators tend to favour more domestically focussed producers." The maker of Nurofen and Durex condoms will pay $90 in cash for Mead Johnson shares. Reckitt - whose business has been hurt by a safety scandal in South Korea and declines in Europe and North America, reported weaker than expected fourther quarter sales. But shares were up 1 percent as the Mead acquisition - Reckitt's biggest ever - overshadowed the results. China is now set to become its second-largest market behind the U.S. Subject to shareholder and regulatory approvals, Reckitt expects the deal to close by the end of the third quarter.

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China baby boom seen as key to Reckitt's U.S. deal

Friday, February 10, 2017 - 01:31