Upcoming AWS Coverage on J. M. Smucker Post-Earnings Results

LONDON, UK / ACCESSWIRE / February 13, 2017 / Active Wall St. blog coverage looks at the headline from Glenview, Illinois based Mead Johnson Nutrition Co. (NYSE: MJN) as the Company announced on February 10, 2017, that it had agreed to be acquired by British consumer goods giant Reckitt Benckiser Group plc (RB). The all-cash transaction is valued at approximately $17.9 billion including debt. Register with us now for your free membership and blog access at:

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One of Mead Johnson Nutrition's competitors within the Processed & Packaged Goods space, The J. M. Smucker Co. (NYSE: SJM), announced on January 26, 2017, that it will conduct its Q3 FY17 earnings conference call and webcast on Friday, February 17, 2017, at 8:00 a.m. ET. Earnings will be released the morning of the call. AWS will be initiating a research report on J. M. Smucker in the coming days.

Today, AWS is promoting its blog coverage on MJN; touching on SJM. Get all of our free blog coverage and more by clicking on the links below:

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Mead Johnson is a paediatric nutrition Company that manufactures, distributes, and sells the Enfa products range, including its flagship brand Enfamil infant formula. Its portfolio of over 70 different nutrition products is sold by retailers across 50 countries in Asia, North America, Latin America, and Europe.

RB is a UK based health and hygiene Company whose portfolio includes popular household brands Lysol, Dettol, Harpic, Air Wick, Cillit Bang, Mucinex, Mortein, Nurofen, Scholl, Strepsils etc. Its head offices are in London, Dubai, and Amsterdam, and it also has presence in over 60 countries with approximately 37,000 employees across the globe.

The Deal

As per the agreement RB will pay $90 for each share of Mead Johnson, i.e. approximate equity value of $16.6 billion. The offer price is at a 29% premium of Mead Johnson's share price of $69.50 on February 01, 2017, the day before the speculation on the deal started. The total enterprise value of the transaction is $.17.9 billion which included Mead Johnson's debt of $1.2 billion as on December 31, 2016. The transaction value represents a multiple of 17.4x non-GAAP EBITDA of Mead Johnson for 2016. The transaction is expected to be finalized in Q3 2017. The transaction is subject to approvals from shareholders of both Companies as well as regulatory approvals from regulators in US, China, and other countries. Till the transaction is completed, Mead Johnson will continue to pay the quarterly dividends to its shareholders.

RB plans to take term loans and bridge funding from Bank of America Merrill Lynch, Deutsche Bank, and HSBC to finance the acquisition.

The deal also comes with a termination clause wherein either of the parties will have to pay $480 million to the other under certain pre-agreed conditions.
Commenting on the acquisition, Kasper Jakobsen, CEO of Mead Johnson said:

"This transaction recognizes the value of our leading brands and strong, global organization. As part of Reckitt Benckiser, a bigger health care focused business recognized for its marketing capabilities, we will derive benefits from both increased scale and diversification."

Rakesh Kapoor, CEO of RB added:

"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'."

Post the merger RB will form an infant and children's nutrition division and will be under the purview of Rakesh Kapoor, CEO of RB. A few key personnel from RB's management will be shifted to this division. RB plans retaining employees of Mead Johnson especially from its R&D, quality, regulatory, and specialist distribution divisions.

How RB benefits from the acquisition?

The current deal is RB's biggest ever acquisition made in the Company's history and the biggest ever acquisition of a US Company by a British one. The deal is significant for RB which has been reporting weaker- than- expected sales from across its markets in Europe and North America.

With this acquisition, RB will cement its position as the leader in the consumer health sector. Mead Johnson and its products are a strong strategic fit for RB. Mead Johnson's Enfa range of paediatric nutritional products will add muscle to RB's portfolio of consumer health products and brands. The Enfa range is worth approximately $46 billion in annual sales and RB expects that the category will continue to grow at approximately 3%-5% per annum in the medium to long-term period.

Another attraction is Mead Johnson's reach in Asian and Latin American markets. The acquisition will open new growth opportunities for RB and expand its global footprint. Mead Johnson's strong R&D as well as specialist distribution capabilities will add to RB's strengths. Mead Johnson products will find a great support structure within RB to grow and expand globally.

RB expects that the acquisition will result in annual cost savings of over £200 million within three years of the acquisition as a result of elimination of duplication in terms advertising, promotion, raw material, packing, and other costs. RB expects other onetime cost synergies of approximately £450 million. RB expects that the accretive adjusted diluted earnings per share (EPS) post-acquisition will be in single digit in the first year and in double digits from the third year. RB also expects that health and hygiene brands will account for 80% the Company's total net revenues.

Stock Performance

On Friday, February 10, 2017, the stock closed the trading session at $87.72, jumping 5.62% from its previous closing price of $83.05. A total volume of 50.31 million shares have exchanged hands, which was higher than the 3-month average volume of 2.22 million shares. Mead Johnson Nutrition's stock price rallied 24.58% in the last month, 18.89% in the past three months, and 29.48% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have surged 23.97%. The stock is trading at a PE ratio of 32.60 and has a dividend yield of 1.88%. Mead Johnson's shares have a market capital of $16.18 billion.

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