Reckitt Benckiser Group (RB) has reached an agreement to acquire Mead Johnson Nutrition Company (MJN), a global leader in pediatric nutrition, for $90 per share in cash. The transaction was valued at approximately $17.9 billion (including net debt). The deal is subject to shareholder and regulatory approvals.

The acquisition of Mead Johnson is aligned with RB’s well-established strategic focus on growing in consumer health and on investing in “Powerbrands” with attractive growth prospects.

Mead Johnson is a leader in the global infant and children’s nutrition category which is worth approximately $46 billion in annual sales. RB expects the category to grow at approximately 3‐5% per annum in the medium to long term.

As a result of this deal, Mead Johnson will become a new division of RB with its Enfamil and Nutramigen brands joining RB’s portfolio of leading consumer health brands. Mead Johnson brings significant R&D, quality, regulatory and specialist distribution capabilities to RB.

“This transaction recognizes the value of our leading brands and strong, global organization,” said Kasper Jakobsen, MJN’s CEO. “As part of Reckitt Benckiser, a bigger healthcare focused business recognized for its marketing capabilities, we will derive benefits from both increased scale and diversification. We are pleased that our shareholders have an opportunity to recognize significant and immediate value and are excited for the new opportunities for our employees as part of a larger company.”

“Mead Johnson’s geographic footprint significantly strengthens our position in developing markets, which account for approximately 40% of the combined group’s sales, with China becoming our second largest ‘Powermarket,'” noted RB’s CEO, Rakesh Kapoor. “We are confident that our deep understanding of consumer needs and our expertise in scaling global brands will deliver significant growth for the MJN portfolio. We will draw on the best of both businesses and continue to build on Mead Johnson’s extensive R&D, regulatory, quality and specialist distribution capabilities.”

According to Lianne van den Bos, senior analyst at Euromonitor International, was surprising in that RB’s takeover bid for MJN signifies little overlap with its current business, but it does hint at future growth strategies for the consumer packaged goods industry.

“Health nutrition is the way forward and marks many companies’ changing direction for growth, the latest examples being Danone and Nestlé,” she added. “Yet for Reckitt Benckiser this marks a diversifying strategy of its product portfolio that already stretches between home care, consumer health and beauty and personal care. This is contrary to the latest corporate strategies recognizing the need for specialization and shedding off brands that do not fit the core business. Nevertheless, with corporate eyes fixated on achieving high margins with baby food and increasing profitability, Reckitt Benckiser’s plunge in a market set to drive half of future global baby food growth, could well pay off in the long run.“

Goldman Sachs acted as Mead Johnson’s lead financial advisor. Morgan Stanley also acted as financial advisor to the company. Kirkland & Ellis LLP acted as Mead Johnson’s legal advisor.