Reckitt Benckiser Group PLC (LON:RB.) will book a £2.5bn loss after agreeing the sale of its infant formula and child nutrition (IFCN) business in China to Primavera Capital.
Consideration for IFCN China including debt will be US$2.2bn with cash proceeds of US$1.3bn. Reckitt will retain an 8% stake in the business.
Reckitt announced it was reviewing the business in February with the entirety of IFCN China now being sold, including manufacturing plants in Nijmegen, the Netherlands and Guangzhou, China.
Reckitt acquired IFCN China when it bought the whole of Mead Johnson in 2017 for US$17.9 bln in cash and debt.
The IFCN China sale includes a royalty-free perpetual and exclusive license of the Mead Johnson and Enfa family of brands in China.
Reckitt will continue to own the Mead Johnson and Enfa brands elsewhere and operate those brands in the rest of the world.
Completion is expected in the second half of 2021 with Reckitt forecasting total transaction costs of around £500mln. The IFCN China business had net assets of about £3.4bn.
Proceeds from the disposal will be used to reduce net debt, said the statement.
Laxman Narasimhan, Reckitt chief executive, added: "After a thorough review of IFCN China, we have found an excellent home for the business under the ownership of Primavera.
"As a result of this transaction, our nutrition business going forward will have a better and more consistent growth and margin profile.
"We remain committed to China with our Hygiene, Health and VMS portfolios China is Durex's largest market and growing strongly and it is an important market for Dettol, Finish and our VMS brands with significant potential for future expansion.”