Reckitt Benckiser (RBGLY) shares surged to the top of London's FTSE 100 Thursday after the consumer goods maker said it's in talks to acquire Mead Johnson (MJN) in what could be a $16.7 billion deal.
Reckitt Benckiser said the talks were "advanced" and that it was offering $90 per share in cash for the baby formula marker, a figure that represents an almost 30% premium on Mead Johnson's closing share price of $69.50 Wednesday in New York.
Mead Johnson shares sky-rocketed in after hours trading after press speculation about a possible purchase, rising 23.7% to $86.
Reckitt Benckiser stock gained 4.6% in the first hour of trading Thursday to change hands at 7,144 pence each, the highest in more than two months.
Reckitt Benckiser said the companies are engaged in a period of due diligence and contract discussion, and that there was no certainty the an transaction will ultimately be agreed. The British company also said that it expects to finance a transaction through a combination of cash and debt.
A deal with Mead Johnson would open opportunities in the baby nutrition market for Reckitt Benckiser and give it further access to Asia.
Mead Johnson holds a considerable market share in China's infant nutrition market. It also has about 44% of the market share in the U.S. and 15% in Mexico. The company has been a perennial target of for takeover speculation, with consumer food giant such as Nestle (NSRGY) batted around.
