Reckitt Benckiser to sell off sauce division in bid to fund Mead Johnson takeover

 
Grace Black
The deal would offload brands including French's mustard and Frank's Red Hot sauce
The deal would offload brands including French's mustard and Frank's Red Hot sauce (Source: Getty)

Reckitt Benckiser (RB), manufacturer of Durex condoms and Dettol cleaning fluid, is planning to sell its £2bn food division to help fund the takeover of Mead Johnson, the Sunday Times has reported.

The deal would offload brands including French's mustard and Frank's Red Hot sauce, in a transaction which could raise more than $3bn (£2.3bn).

American food giant Kraft Heinz is predicted to show interest in the auction, after pulling out red-faced from its takeover bid for Unilever in February.

However, Kraft Heinz – which owns brands including Cadbury's and Philadelphia – could run into competition issues, the report speculates. American private equity firms are also likely to cast an eye over the division.

Read more: Durex owner Reckitt Benckiser is buying a US baby formula maker

Proceeds from the sale would be used to pay off the mountain of debt which RB incurred buying Mead Johnson, the baby food manufacturer, for $17.9bn in February. RB hoped the move would strengthen its presence in developing markets, including China, and called the acquisition a "significant step forward" in its push to become a bigger consumer health player.

RB's developing consumer health focus means the food division has become a low priority in recent years, and accounts for just five per cent of the company's global sales. According to the Sunday Times report, last year saw a decline in the division's profit margins despite a five per cent increase in food sales to £411m, while RB's overall business saw a five per cent rise in profits to £1.8bn.

Read more: Pay of Durex owner droops after South Korean scandal

The auction comes following Unilever's announcement that it would explore the sale of its spreads brands, including Stork and Flora, for around £6bn. Although the conglomerate was already preparing a strategic review, it is understood that Kraft Heinz's unsolicited approach accelerated the process.

Both RB and Kraft Heinz declined to comment on the report.

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