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Reckitt Benckiser (RB) has this morning confirmed media reports it is in talks to buy US child nutrition firm Mead Johnson.
RB said it is in “advanced negotiations” to acquire the entire share capital of Mead Johnson for $90 in cash, valuing Mead Johnson at approximately $16.7bn (£13.2bn).
Mead Johnson was trading at $69.50 at close of play last night, having lost more than 20% of their value over the past six months amid difficult trading.
RB said the parties are “presently engaged in a period of due diligence and contract discussion” and that there remains no certainty any transaction will ultimately be agreed.
Reckitt said it expects to finance the possible transaction through a combination of cash and debt, whilst retaining a strong investment grade credit rating.
Reckitt shares are up 3.8% so far this morning to 7,080p, while Mead Johnson’s shares are up 23.7% in after hours trading in the US to $86.
Morning update
Pork processor Cranswick (CWK) has released a trading update for the three months to 31 December, telling the market its trading for the period was in-line with expectations.
Cranswick said total and underlying revenue was well ahead of the same period last year, underpinned by strong volume growth and supported by a “robust performance” over the key Christmas trading period.
Export sales continued to grow strongly, with Far East revenues well ahead of the same quarter last year, reflecting both ongoing demand from the region and increased output from the group’s two primary processing facilities.
It cautioned that input costs rose further during the period, but efficiency improvements, internal pig production and constructive pricing discussions with customers helped partially mitigate the impact.
Cranswick stated: “With experienced management at all levels of the group, a strong range of products, a well-invested asset base and a robust financial position, the board is confident in both the prospects for the remainder of the current financial year and the continued long term success and development of the business.”
Real Good Food (RGD) has instigated “targeted price increases” to cope with the difficult trading environment for food manufacturers.
In an update on trading the group said its sales in its crucial Christmas period were up 8% year-on-year.
However, it cautioned: “The overall trading environment for food manufacturers remains difficult with the biggest factors affecting Real Good Food being the short term impact of high commodity prices, especially butter, sugar and oils, all key ingredients for the group, and a weakening of sterling post Brexit.”
In particular it said the cost of butter has more than doubled in price. The timing of these factors was “unfortunate” as it coincided with its vital third quarter where it generates a large proportion of its profits. RGD said EBITDA margins had been impacted but it “remains confident that it will be reporting revenue and EBITDA for the full year in line with current market consensus.”
It added: “In common with its competitors, Real Good Food, having examined all options to mitigate the impact, has now implemented targeted price increases and expects margins to be largely restored by the start of the next financial year.”
On the markets this morning, the FTSE 100 is 0.1% up at 7,116.6pts.
Other than Reckitt, risers include Compass Group (CPG), up 2.9% to 1,438p, Premier Foods (PFD), up 1.9% to 40.2p and SSP Group (SSPG), up 1.7% to 404.3p.
Fallers include Worldpay Group (WPG), down 3.3% and Ocado (OCDO), down 1.9% to 238.1p.
Cranswick is up 0.8% this morning to 2,321p after its trading update, while Real Good Food is unchanged at 33p.
Yesterday in the City
The FTSE 100 ended the day up 0.2% at 7,107.6pts as strong gains early in the day tailed off towards the end of trading.
Greencore (GNC) continued where it left off on Tuesday after its better-than-expected trading update, rising another 2.3% to 241.5p yesterday.
Also on the up was AG Barr (BAG), rising 1.6% to 510p after announcing full-year like-for-like sales were up 1.5%.
Morrisons (MRW) rose 1.5% to 239.6p as rumours floated of a possible, if unlikely, tie-up with Sainsbury’s, while Marks & Spencer (MKS), was also up 1.2% to 339.4p.
PureCircle was up 4.3% to 292p in the week it confirmed US customs had given it a clean bill of health over human rights accusations. Also on the rise were Finsbury Food Group (FIF), up 3.8% to 108.5p, Majestic Wine (WINE) 3.7% up to 364.25p, Conviviality (CVR), up 3.7% to 261.75p.
Fallers included Hotel Chocolat (HOTC), down 3.7% to 247.5p, McColl’s (MCLS), down 2.8% to 174.5p and Dairy Crest (DCG), down 1.2% to 588.5p.
The shine came off Ocado’s (OCDO) Tuesday share price rise after it beat full-year profit expectations as the shares fell back 2.7% to 242.6p yesterday.
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