The Faber Report

Don’t Jump on the Mead Johnson Rumor


A report from Group Danone had hired an investment bank to work on a possible bid for baby food company Mead Johnson had those shares up over 10% briefly.

After speaking with bankers close to both companies it appears investors looking for a deal anytime soon will be disappointed.

Yes, Danone would have interest in looking at Mead at some point, they tell me. But Mead Jonhson is still controlled by Bristol-Myers-Squibb (83.1% ownership stake) from which it was recently spun off and these bankers tell me Bristol has not shown interest in selling.

Bristol faces a huge tax hit if it sells its stake for cash given its cost basis in Mead is very low, said one banker close to Bristol. He went on to say that he sees no signs from Bristol that it has any interest in parting with Mead Johnson. If and when that changes, bankers close to Danone tell me that if and when Bristol is interested in relinquishing its control stake, there likely would be interest from Group Danone in looking at buying it and perhaps the rest of Mead Johnson.

Said one banker close to Danone “There is nothing new and nothing happening near term.” All of that is not to mention that at present buying Mead Johnson would seem implausible for Group Danone, given it would take at least $12 billion. “They can’t afford it, “ said the banker.



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