[ad_1]
Reckitt Benckiser has agreed to sell his baby formula business in China to private equity firm Primavera, which wants to end its struggle with a division that has been growing for years.
The deal is worth $ 2.2 billion. The UK consumer goods company will receive around $ 1.3 billion from the transaction, which it will use to pay off debts, and will maintain an 8 per cent stake in the unit in a statement on Saturday.
The deal will help Reckitt “rejuvenate growth and create long-term value,” its CEO Laxman Narasimhan said in a statement, adding that the group “actively and decisively manages our portfolio”.
When Reckitt entered the children’s formula business in 2017 when it bought Mead Johnson’s children’s milk group for a $ 13 billion deal, former CEO Rakesh Kapoor was part of a push to target the company’s higher-margin consumer health products. The unit makes brands like Enfamil.
However, it has since struggled, partly due to declining Chinese birth rates and local competition.
Last year, Reckitt took an impairment of $ 5 billion in the purchase of Mead Johnson, deducting nearly a third of the value of the previous book.
In 2018, a production shutdown at the Dutch children’s formula factory factory left Reckitt unable to respond to customer demand, deducting £ 70 million from the company’s revenue and raising its share price.
Martin Deboo Jefferies analyst in March said he believes Reckitt shareholders “would be happy to be away [of the China baby formula business] at almost any price ”.
Reckitt expects a net loss of about 2.5 billion euros from the sale to Primavera as it measures the goodwill and intangible assets of the unit, he added.
The company’s infant formula department as a whole saw a 7.4 percent drop in sales in the first quarter of 2021, a year earlier.
Under the agreement, Primavera, which has previously invested in Alibaba, Ant Group and ByteDance, will control Reckitt’s manufacturing plants in Nijmeg in the Netherlands and Guangzhou in China.
Reckitt will still own the Mead Johnson and Enfa brands, but Primavera will have a permanent unlicensed license to use them in China.
In 2019, Narasimhan took over the role of Reckitt, who suffered at the end of Kapkor’s tenure.
Its similar revenue rose 4.1 percent in the first quarter of this year, it said in April, when sales of hygiene products such as Lisol disinfectant rose.
Narasimhan said Reckitt was keen to grow other businesses in China, the largest market for Durex condoms.
Fred Hu Primavera, founder and president of the company, said the agreement would lead to a “strong partnership” with Reckitt.
The Guangzhou-based baby formula formula employs about 3,000 people and earns £ 861 million a year and up to December.
[ad_2]
Source link
