Reckitt Benckiser has agreed to sell its underperforming infant formula and child nutrition (IFCN) business in China to investment firm Primavera in a deal that values the unit at $2.2bn.
The UK-based consumer goods company expects to receive about $1.3bn in cash from the transaction, which will be used to pay down debts. It will also keep an 8% stake in the business.
Reckitt announced in February that it had launched a strategic review of the Chinese unit it acquired with the $16.6bn purchase of US baby milk group Mead Johnson Nutrition four years ago. It has since struggled to compete with local brands amid falling birth rates in China and the company took a £985m impairment charge on the business in 2020. IFCN China generated net revenues of £861m last year, representing around 6% of Reckitt’s group sales.
Reckitt said the deal with China-based Primavera included the sale of its manufacturing plants at Nijmegen in the Netherlands, and in Guangzhou, China, and a royalty-free perpetual and exclusive license of the Mead Johnson and Enfa family of brands in the country.
After the deal’s close, expected in the second half of this year, Reckitt will continue to own and operate the Mead Johnson and Enfa brands in the rest of the world.
The wider Reckitt group reported exceptional performance last year as households and businesses concerned about the Covid-19 virus snapped up its cleaning and disinfectant products.
Chief Executive Laxman Narasimhan said the IFCN deal was another step in Reckitt’s strategy to “rejuvenate growth and create long-term value”. He added that the group is “actively, and decisively, managing our portfolio”.
Narasimhan stressed that Reckitt remained committed to China with its Hygiene, Health and VMS portfolios. “We are excited about the opportunities to grow our brands and expand our business in the future,” he said.
Primavera has previously invested in Alibaba, Ant Group and ByteDance. Its Founder and Chairman Dr. Fred Hu 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.”
