Reckitt Benckiser Group has signed a deal with Primavera Capital Group to sell its Chinese baby-formula business. The is worth around USD 2.2 billion. Reckitt Benckiser took the decision as it was looking for an option to exit the struggling sector. The company is expected to retain an 8 per cent stake in the unit. After costs, the consumer goods group is expected to receive around USD 1.3 billion. The company said in a release that it plans to use the money to reduce debt. The company expects a net loss of around USD 3.5 billion on the sale of its baby formula business. The loss will primarily because of the remeasurement of goodwill and intangible assets. The consumer good company had purchased the business in 2017. The purchase was part of the deal to acquire American baby milk group Mead Johnson. As part of the deal, the company had then paid around USD 16.6 billion. Now the company had decided to sell most of the Chinese division to Primavera.
According to people aware of the development, the deal is expected to be finalized in the second half of the year 2021. With this, the curtain comes down on Reckitt’s venture into the baby-formula business. The timing of Reckitt’s entry into the industry coincides with the starting of the struggle for the sector. Under the deal, Primavera Capital will also take over the manufacturing plants in Nijmegen, the oldest city in the Netherlands, and China’s Guangzhou. The deal will also give the company exclusive license to brands like Mead Johnson and Enfa in China. However, Reckitt will continue to the owner of the company and the brands will be operated by it in other parts of the world.
Reckitt had purchased the business in 2017. Three years later, the infant-nutrition business in Greater China was put under strategic review by the company. This was done as part of the biggest portfolio revamp by chief executive officer Laxman Narasimhan, who took over the post in late 2019. The company saw an overall growth in sales, around 12 per cent in 2020, under his leadership. This was mainly because of the surge in demand for hygiene products. But the baby-milk business in China remained an underperformer. China for long has been one of the biggest markets for baby products. But the country has lost the allure because of the sharp decline in birth rates.
