Mead Johnson Nutrition pursuing buys
Mead Johnson Nutrition (NYSE:MJN), the Glenview, Illinois-based pediatric nutrition company, is interested in making acquisitions and is in constant talks with potential targets, according to executives.
During his prepared remarks at Tuesday’s Consumer Analysts Group of New York conference, CFO Peter Leemputte outlined the company’s financial position.
“We're keenly aware of our cash balance and also the available debt capacity that we have, but we reiterate that growth is the highest priority for our use of cash and we intend to pursue potential acquisitions, such as the deal in Argentina,” the CFO said. “It can be very difficult to predict the timing of those transactions, and we're going to take a little bit more of the longer-term perspective in terms of pursuing those.”
On 15 March 2012, MJN acquired an 80% stake in Nutricion para el Conosur, a manufacturer, distributor and seller of infant formula and children’s nutrition products in Argentina under the SanCor Bebe and Bebe Plus brands. The purchase price was ARS 850.7m (USD 97.9m).
In the Q&A session at Tuesday’s conference, Deutsche Bank analyst Eric Katzman noted that MJN had not made many overseas buys aside from the Argentina-based deal, and asked CEO Kasper Jakobsen if it had been close to making any acquisitions.
The CEO said the company looked at M&A in a similar way to organic growth, considering potential revenues and if it could accelerate the growth of the possible target. He said it also evaluated whether an asset could bring new capabilities to market faster, and therefore increase growth in its base business.
Jakobsen noted that there were few independent businesses in MJN’s core business, with the majority of assets being fast-growing and profitable parts of larger entities which were rarely for sale.
“And I think as we look forward, the timing of it (M&A) is going to be somewhat lumpy,” he said. “I'd like all of you to think that that's not because we're not intent on doing it. It is not because we are not working on it. It's not because we are not talking to people. In fact, we're talking to people sort of on an ongoing constant basis.”
The CEO said MJN was often dependent on special situations occurring which could present a more adverse risk profile than it would like, noting the Argentinian acquisition as an example.
“But if you want to expand in this very attractive category, you got to be willing to ride some of these storms and take a longer-term view on it, and we are doing that. And we will do things,” Jakobsen concluded.
MJN provides more than 70 pediatric nutrition products in over 50 countries across the globe. Its brands include Enfamil, Choco Milk, Lactum, Nutramigen and Sustagen.
The company has a light M&A history since its IPO in February 2009.
In early 2014, MJN completed the sale of its interest in International Pediatric Nutrition Company to JV partner Almarai. The deal was valued at USD 4m. In 2011, MJN’s Brazilian subsidiary MEFEN Participacoes bought Mappel Industria Alimentos, a Brazil-based company manufacturing food items, for an undisclosed sum.
Bristol-Myers Squibb Company spun-off its 83.1% stake in MJN to shareholders via an exchange offer in late 2009.
For its February 2009 IPO, lead managers were BofAML, Citi, Credit Suisse, JPMorgan and Morgan Stanley, while Cravath, Swaine & Moore was used for legal. The same law firm was used by Bristol-Myers for the spin-off later that year. MJN used William Blair and Mayer Brown for that transaction. In-country law firm Demarest was used by MJN’s subsidiary for the Brazilian deal in 2011.
MJN has a market capitalization of USD 21bn.