Amid various speculations, the sale of Mead Johnson's infant nutrition business in Greater China has finally been settled. In the early morning of June 6, Reckitt Benckiser, the parent company of Mead Johnson, announced that it had reached a final agreement to sell its infant formula and children's nutrition business in China (Mead Johnson China) to Primavera Capital for $2.2 billion. After the transaction is completed, Reckitt will retain an 8% stake in the business and expects to receive $1.3 billion in cash.
-01- What did Primavera Capital buy for 14 billion? It is understood that Reckitt will sell the entire infant nutrition business in Greater China, including production facilities in Nijmegen, the Netherlands, and Guangzhou. The transaction includes a perpetual, royalty-free exclusive license to use the Mead Johnson brand and the brands Blue, Platinum, and Aner in Greater China. After the transaction, Reckitt will continue to own the Mead Johnson Blue, Platinum, and Aner brands globally and operate these brands in countries and regions outside Greater China.
The Greater China infant nutrition business, including the Nijmegen plant, the Guangzhou plant, and the R&D center, has a professional team of nearly 3,000 people, headquartered in Guangzhou.
For the fiscal year ended December 31, 2020, the Greater China infant nutrition business had net revenue of £861 million (approximately RMB 7.8 billion), profit of £850 million (approximately RMB 7.766 billion), and total assets of £5.4 billion (approximately RMB 48.72 billion). After the transaction, mainly due to the revaluation of goodwill and intangible assets of the Greater China infant nutrition business, Reckitt expects to incur a net loss of approximately £2.5 billion.
-02- Who is Primavera Capital? Primavera Capital is a leading research, advisory, and global alternative investment firm based in China, managing large onshore and offshore investment funds in RMB and US dollars. Many of Primavera Capital's investments are well-known in China, including Alibaba, ByteDance, Yum China, HelloChuxing, Danke Apartment, and the domestic milk powder brand Junlebao. In 2019, when Junlebao spun off from Mengniu Dairy, the acquisition of 51% of Junlebao's equity from Mengniu was led by Junlebao Group management, with Primavera Capital joining forces with Ping An Capital and Junqian Co., Ltd. to complete the equity acquisition, with a transaction consideration of RMB 4 billion. According to other media reports, after Reckitt signaled its intention to sell Mead Johnson China, Yili, New Hope Dairy, and Feihe all participated in the bidding for Mead Johnson, while Junlebao was expected to indirectly control Mead Johnson China through its investor Primavera Capital's bid. Among the four companies mentioned, Junlebao offered the highest price.
-03- Winner: Junlebao Who benefits the most from the sale of Mead Johnson's Greater China infant nutrition business? In most people's view, it is undoubtedly Junlebao. Junlebao's infant formula business, which started in 2014, has already entered the leading ranks in China, and Junlebao Dairy Group has leveraged this to join China's dairy industry's "10 billion club."
As an investor in Junlebao, Primavera Capital has now taken control of the Greater China business of Mead Johnson, a well-known international infant nutrition company. Whether it will integrate and synergize the Mead Johnson business with Junlebao's milk powder business in the future remains unknown, but as a shareholder of Junlebao, in a sense, this also means that Junlebao has become a winner in this bidding. In Reckitt's announcement, it was also mentioned that among the many industry leaders Primavera Capital has invested in, Junlebao is included. Some insiders said that after Junlebao's investor completes the acquisition of Mead Johnson China, it is likely to hand over the latter to Junlebao for management, opening up an independent high-end milk powder business. Operating Mead Johnson also aligns with Junlebao's milk powder business development goals. The latest data shows that in 2019, Junlebao achieved sales revenue of approximately RMB 16.3 billion, a year-on-year increase of 25%, with milk powder production and sales of 7,500 tons. In 2020, Junlebao stated that it aimed to sprint to 100,000 tons of milk powder production and sales, and to become a "leading global infant milk powder brand" within the next five years. For Junlebao, which is preparing for an IPO, controlling Mead Johnson China's business will not only increase revenue scale but also enhance its valuation. Reckitt CEO Laxman Narasimhan is very optimistic about this transaction. He said: **"This transaction marks another solid step in Reckitt's strategy to revive sustainable growth and create long-term value." In Reckitt's announcement, Primavera Capital Group founder and chairman Hu Zuliu also said: "We look forward to maintaining a close cooperative relationship with Reckitt and continuing to carry forward the brand heritage and strength of Mead Johnson. We have considerable experience in investing in China and a rich network of local resources, which can provide strong support for the next stage of development of this business."
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