UK's Reckitt Benckiser in advanced talks with Mead Johnson

U.K company Reckitt Benckiser Group has emerged as a surprise suitor for Glenview-based Mead Johnson Nutrition, starting talks on a $16.7 billion purchase of the baby-food maker to build its faster growing consumer-health business and its presence in Asia.

The maker of Lysol cleaners said late Wednesday it's in advanced negotiations to acquire the U.S. company for $90 a share in cash in what would be the second-biggest acquisition by a British company since the Brexit vote. The offer price is 29 percent above Mead's last closing price and values the target at 17 times earnings compared with multiples of 20 that Nestle paid for Pfizer's baby-formula unit in 2012 and 22 that Danone paid for baby-food maker Numico in 2007, according to John Baumgartner, an analyst at Wells Fargo.

The acquisition would let Reckitt Benckiser add formula to a portfolio of consumer brands that include Nurofen painkillers, Strepsils throat lozenges and French's mustard. The company has proved able to enter and thrive in new categories before, as it did when it acquired Durex condom maker SSL International in 2010. And it already has a toe in the nutrition business from its 2012 purchase of Schiff Nutrition, which makes Omega-3 supplements and joint-pain pills.

Speculation of a bid for Mead Johnson has been rife since the maker of Enfamil went public in 2009, though Nestle and French yogurt maker Danone have been considered the most likely buyers. Reckitt Benckiser Chief Executive Officer Rakesh Kapoor is striking as Danone is busy trying to complete its $10 billion acquisition of organic food maker WhiteWave Foods. Nestle, whose new CEO just started last month, would face too many antitrust obstacles in such a transaction, analysts at RBC Europe have said.

Up until now, Kapoor has turned more to over-the-counter health brands such as Mucinex and Scholl for growth, with the home and personal-care divisions expanding more slowly. Hygiene represents about 40 percent of Reckitt Benckiser's sales, compared with 33 percent for health. More recently, the company has been grappling with slowing growth in emerging markets and fallout from the sale of toxic disinfectant products in South Korea.

"Reckitt's portfolio exposure to health, hygiene and home products presents a much cleaner takeout scenario when compared to antitrust issues which may otherwise arise in the case of a bid by a pure competitor to Mead," wrote John Baumgartner, an analyst at Wells Fargo.

Shares of Mead Johnson had fallen about 34 percent from their 2015 peak, hurt in part by a resurgence in interest in breast-feeding in countries such as China. With a 10 percent share of the baby-food market, the company trails Nestle and Danone globally, though it's second only to Nestle in Asia, the biggest market.

Baby food will likely be one of Asia's fastest-growing food categories, even as the industry contends with near-term headwinds, Bloomberg Intelligence noted in December.