Time to get a grip at RB

No Free Lunch

Time to get a grip at RB

It must be reassuring for shareholders in RB (RB.) - the snappy name of the company formerly known as Reckitt Benckiser - that disgruntled Mead Johnson investors have filed a lawsuit alleging that its cash offer of $90 a share vastly undervalues their company. Baby milk and infant nutrition is hardly familiar territory for RB, which is more associated with health, hygiene and home products, but the lawsuit suggests that RB is getting a bargain. RB says in a distinctly unsnappy way: “The acquisition is expected to be accretive to adjusted diluted earnings per share (EPS) in the first full year following completion and double-digit accretive by year 3.” In other words, RB is borrowing to finance the deal so, for the same number of shares in issue, Mead will add to RB’s earnings and RB’s EPS will go up.

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