Dive Brief:
- Betaville released a blog post earlier this week that said Danone and Nestle were interested in acquiring Mead Johnson, citing unnamed sources. These two companies have been named in rumors of such a takeover for years. Mead Johnson's stock price has spiked since, as high as 11% Tuesday.
- Danone and Mead Johnson would face little scrutiny from antitrust regulators because their infant formula products don't compete. A Nestle takeover, however, could result in overlap in certain markets, including North America.
- Controversy over product safety and bribery claims has brought previous takeover discussions to a halt, Danone shareholders and analysts told Bloomberg in mid-2014.
Dive Insight:
Before takeover rumors began again earlier this week, Mead Johnson's stock price had dropped 26% after hitting a high in February 2015.
Much of the Mead Johnson speculation surrounds the growth of the food market internationally, namely Asia, where growth is expected to outpace the rest of the world for at least the next five years. Amid that growth, baby food is expected to be the region's fastest-growing category, according to Euromonitor.
If the deal is back on the table, the infant formula market could see a shift in company market share. Danone has been in the infant nutrition market for well over a century, but its main brands, Nutricia, Cow & Gate, Aptamil, and Nutrilon aren't as pronounced in the U.S. as Mead Johnson's Enfamil or Abbott's Similac. Acquiring Mead Johnson would give Danone a stronger presence and share in markets like North America and Asia. It wouldn't face the antitrust hurdles that a Nestle takeover of Mead Johnson would.
An unnamed source told Benzinga in February that this deal could be valued at about $18 billion market capitalization, which would be a sizable acquisition to add to the 2016 M&A dollar value. Last year, a handful of massive acquisitions, including Kraft Heinz and the proposed Anheuser-Busch InBev and SABMiller merger, sent the M&A dollar value soaring to a record high.
Analysts believe that many of the major deals have now happened, so the M&A dollar value would likely settle down in 2016 while deal count remained steady. This speculative M&A talk, like that of Mondelez, could drive that dollar value back up, though it's still unlikely to reach 2015 levels.