UK consumer goods maker Reckitt Benckiser Group Plc said it was in advanced talks to buy baby formula maker Mead Johnson Nutrition Co in a $16.7 billion deal that would take it in a new direction and boost its business in Asia.
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Reckitt Benckiser said late on Wednesday night it would pay $90 in cash for each Mead Johnson share, a 29.5 percent premium to Wednesday's close.
Shares of Mead Johnson, long rumored to be a takeover target for Danone , jumped 22 percent in after-market trading.
Mead Johnson, which makes Enfamil baby formula, has been seen as an attractive takeover target since being spun off from drugmaker Bristol-Myers Squibb in 2009, due in part to its big international footprint in Latin America and Asia.
Reckitt's proposed price represents a multiple of 17 times Mead Johnson's estimated 2017 earnings before interest, tax, depreciation and amortization (EBITDA), said analysts at Wells Fargo, falling short of the 20 times Nestle paid for Wyeth in 2012 and the 22 times Danone paid for Numico in 2007.
Still, the premium is in line with other recent consumer staples deals, and is appropriate given regulatory changes in China and price promotion, Wells Fargo said.
Reckitt Benckiser, which makes Durex condoms, Nurofen tablets and Scholl footcare products, said it expected to finance the proposed deal through cash and debt.
Sources told Reuters in 2014 that Danone was interested in buying it, but the French company agreed late last year to buy WhiteWave instead.
The Wall Street Journal first reported on the deal.
(Reporting by Martinne Geller in London, Sruthi Shankar in Bengaluru and Lauren Hirsch in New York; Editing by Alan Crosby, G Crosse and Gopakumar Warrier)