British multinational consumer goods company Reckitt Benckiser Group Plc agreed to sell its Chinese baby formula business to Primavera Capital Group for a price tag of $2.2 billion. This comes as the Slough, England-based company seeks to exit from the sector which is currently taking the strain.
Reckitt revealed in a statement on Saturday that it will retain an 8% stake in the business following the sale. With net cash proceeds expecting to be around $1.3 billion, the company is looking to use this income as a means of reducing its debt. The company expects to incur a net loss of £2.5 billion ($3.5 billion) from the sale, primarily due to the re-measurement of goodwill and intangible assets.
Some of the assets included in the deal are manufacturing plants in Nijmegen in the Netherlands and Guangzhou, China, along with the exclusive licenses of the Mead Johnson and Enfa brands in China. The sale marks the end of a four-year journey for the company into the baby formula business. Since initially purchasing the U.S.-based Mead Johnson group in 2017, Reckitt has struggled to turn a profit in this sector.
With the transaction expected to be completed in the second half of 2021, Reckitt will retain global ownership and will continue to operate the Mead Johnson and Enfa brands across the rest of the world.
