Reckitt Benckiser FY16 Profit Climbs; To Acquire Mead Johnson For $16.6 Bln Cash

(RTTNews) - UK Consumer goods giant Reckitt Benckiser plc (RBGLY, RB.L) reported Friday higher profit in its fiscal 2016 with increased net revenues. The company also lifted its dividend, and said it expects higher revenues in fiscal 2017 on a like-for-like basis.

Separately, Reckitt Benckiser announced it has signed a merger agreement to acquire U.S. infant formula maker Mead Johnson Nutrition Co. (MJN) for $90 per share in cash, valuing the total equity at $16.6 billion. The total value, including Mead Johnson's net debt, would be approximately $17.9 billion.

The terms represent a premium of 29 percent to the closing price of Mead Johnson on February 1, and 24 percent to Mead Johnson's 30-day volume-weighted average price.

Reckitt Benckiser expects the acquisition to be accretive to adjusted earnings per share in the first full year following completion and double-digit accretive by year three.

The deal is expected to close by the end of the third quarter, subject to shareholder and regulatory approval.

Reckitt Benckiser CEO Rakesh Kapoor noted that Mead Johnson's geographic footprint significantly strengthens RB's position in developing markets, which will account for approximately 40 percent of the combined group's sales.

The boards of RB and Mead Johnson have both approved the transaction and have resolved to recommend that their respective shareholders vote in favour of the deal.

For fiscal 2016, Reckitt Benckiser's pre-tax profit grew to 2.39 billion pounds from last year's 2.21 billion pounds. Attributable net income grew 5 percent from last year to 1.83 billion pounds or 256.5 pence per share. The latest results included exceptional costs of 367 million pounds, principally in respect of the HS issue in Korea.

On an adjusted basis, net income was 2.16 billion pounds or 302.0 pence per share, 15 percent higher than last year.

Adjusted operating profit was up 17 percent to 2.78 billion pounds.

Total full-year net revenue was 9.89 billion pounds, higher than last year's 8.87 billion pounds. Revenues grew 2 percent at constant exchange rates, and the increase was 3 percent on a like-for-like basis.

Like-for-like revenues in Health & Hygiene increased 4 percent. Health reflected broad-based growth across the portfolio, offset by Scholl / Amopé decline.

In the fourth quarter, net revenue was 2.76 billion pounds, an increase of 1 percent on a LFL basis.

Further, the company said its Board recommended a final dividend of 95.0p per share, higher than last year's 88.7p. This results in total dividend for 2016 of 153.2p, an increase of 10 percent from last year.

Looking ahead, Kapoor said, "In 2017, we expect macro conditions to remain challenging, and for a number of existing headwinds to persist in the first half. We are targeting LFL net revenue growth of 3 percent. For operating margin, we reiterate our medium term target of moderate margin expansion."

In pre-market activity on the NYSE, Mead Johnson shares were gaining around 4.74 percent.

In London, Reckitt Benckiser shares were trading at 7,296.34 pence, up 0.79 percent.