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Reckitt Benckiser explores sale of food business

FBR Staff Writer Published 04 April 2017

UK consumers goods company Reckitt Benckiser is weighing strategic options for its food business to help pay down debt after its planned $16.6bn purchase of Mead Johnson.

The company is mulling over all options for the food business, including offloading its French’s sauce and mustard products, as reported by the BBC.

Reckitt Benckiser’s food business which brought it sales revenue of over £400m last year is estimated to have a total value of around £2.4bn.

A statement released by Reckitt Benckiser read: “Food is a truly fantastic business with great brands, people and a history of outperformance. It is nevertheless non-core to Reckitt Benckiser.”

Reckitt Benckiser’s confirmation to possibly offload its food business comes days after revealing its intentions to cut the salary of CEO Rakesh Kapoor from 2015’s figure of £25.5m to £14.6m.

At the start of the year, certain shareholders in the company hinted that Kapoor had pushed the Mead Johnson merger to make sure he achieved high-paying bonus targets.

However, Kapoor stood by the stance that the transaction with the American baby nutrition company was in line with Reckitt Benckiser’s strategy. Besides, he said that the deal would result in £200m of cost savings for the British company after three years although there was no chance of it giving a return for around five years.

Reckitt Benckiser entered into a definitive agreement to takeover the infant formula manufacturer and also the Enfa brand owner, Mead Johnson in February. Although the boards of the two firms have given their nod for the merger transaction, shareholders on either side are yet to vote on the same.

If everything goes as planned including receipt of regulatory approvals, then Reckitt Benckiser would be in a position to close the deal by the end of the third quarter.

Image: Reckitt Benckiser could sell its sauce and mustard products. Photo: courtesy of cyclonebill/Commons.wikimedia.org.