By Kane Wu
HONG KONG, March 22 (Reuters) - British consumer goods
company Reckitt Benckiser Group is considering selling
its infant formula business in Greater China, in a deal that
could value the business at more than $2 billion, two people
with knowledge of the matter said.
The group has hired Morgan Stanley to conduct a
strategic review of its infant formula unit Mead Johnson in
Greater China, the sources said, declining to comment as the
information is confidential.
A sale process could start in the second quarter after the
bank gets initial feedback from potential buyers, which include
both strategic and private equity firms, the sources said.
They however cautioned no decision has been made and that
business valuation could change due to the impact of COVID-19.
Reckitt Benckiser did not immediately respond to a request
for comment while Morgan Stanley declined to comment.
The group announced the strategic review in February, saying
multiple options were being explored.
Its Greater China infant formula business represents 6% of
group sales, which were almost 14 billion pounds ($19.8 billion)
in 2020, up 11.8% year-on-year, Reckitt Benckiser said at the
time.
U.S.-headquartered Mead Johnson, which Reckitt Benckiser
bought for $16.6 billion in 2017, runs a range of infant formula
brands including Enfamil, Enfapro and Lactum.
Laxman Narasimhan, Reckitt Benckiser's chief executive, said
in February that challenges to the China business included Hong
Kong's longer-than-expected border closure during COVID-19,
local competition, a changing regulatory environment and lower
birth rates in the country.
Chinese consumers have been favouring imported infant
formula since the country's 2008 baby milk contamination
scandal. The top four best-selling infant formula brands on
e-commerce platform JD.COM for example are all foreign.
However, local brands are catching up fast with brands such
as Morgan Stanley-backed Feihe gaining significant market share.
China imported 335,600 tonnes of infant formula in 2020,
down 2.8% year-on-year, according to the Dairy Association of
China.
(Reporting by Kane Wu in Hong Kong, additional reporting by
Pamela Barbaglia in London; Editing by Emelia Sithole-Matarise)
