Reckitt Benckiser to sell 92% stake in Chinese infant formula business for $1.3bn

Reckitt Benckiser Group has agreed to divest 92% stake in Infant Formula and Child Nutrition business in China (IFCN China) to Primavera Capital Group, a Chinese investment firm, for about $1.3 billion in cash.

The deal values 100% of the Chinese infant formula business at $2.2 billion.

Reckitt Benckiser will retain a stake of 8% in the business.

IFCN China has operations in mainland China, Taiwan, and Hong Kong. Its brands in the Chinese infant formula market include Mead Johnson Nutrition, Enfa Gentlease, Enfaschool, Enfamil, Enfagrow, NutriPower, MultiGrow, Enfinitas Mama, Enfinitas, and Enfa Mama.

Based in Guangzhou, IFCN China has a workforce of around 3,000 employees.

In 2020, IFCN China had reported net revenue of £861 million and an operating profit of £85 million. Its gross assets as of 31 December 2020 were £5.4 billion.

The decision from the British consumer goods company to sell the Chinese infant formula business follows a strategic review of the infant formula business launched in February 2021.

Laxman Narasimhan – Reckitt Benckiser CEO said: “After a thorough review of IFCN China, we have found an excellent home for the business under the ownership of Primavera. As a result of this transaction, our Nutrition business going forward will have a better and more consistent growth and margin profile. We are market leaders in infant nutrition in North America, ASEAN and Latin America, and we have a strong Vitamins, Minerals and Supplements portfolio which includes an exciting Adult Nutrition business.

“This, combined with our focus on execution, brand building and productivity, our investment in R&D and innovation, and our expertise in eCommerce, gives us a solid foundation from which to grow.”

Reckitt Benckiser to sell 92% stake in Chinese infant formula business to Primavera Capital Group for $1.3bn. Photo courtesy of Free-Photos from Pixabay.

The deal includes sale of the manufacturing plants of IFCN China in Nijmegen in the Netherlands and Guangzhou in China. It also includes a royalty-free perpetual and exclusive license of the Enfa and Mead Johnson family of brands in China.

After the closing of the deal, Reckitt Benckiser will continue to own the Enfa and Mead Johnson family of brands globally and will operate them in the rest of the world.

Dr. Fred Hu – Primavera Founder and Chairman said: “We look forward to a strong collaboration with Reckitt, to continue to build on the heritage and strength of the Mead Johnson brand. We have considerable experience investing and growing and expanding global brands in China.

“We are excited to support the business in its next phase of growth, leveraging our resources and local leadership.”

The deal, which is contingent on consultation with the Netherlands woPrimavera Capital Grouprks council and the meeting of customary closing conditions, is expected to close in the latter half of this year.