Item 1.01. Entry into a Material Definitive Agreement.
On February 10, 2017, Mead Johnson Nutrition Company, a Delaware corporation ("Mead Johnson" or the "Company"), Reckitt Benckiser
Group plc, a company incorporated in England and Wales ("Reckitt Benckiser" or "Parent"), and Marigold Merger Sub, Inc., a Delaware corporation and a wholly owned indirect subsidiary of
Parent ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Parent will indirectly acquire the Company by means of a merger of Merger Sub with and
into the Company on the terms and subject to the conditions set forth in the Merger Agreement (the "Merger").
At
the effective time of the Merger (the "Effective Time"), on the terms and subject to the conditions set forth in the Merger Agreement, each share of common stock, par value $0.01 per
share, of the Company (the "Common Stock") outstanding immediately prior to the Effective Time (other than (i) each share of Common Stock held by the Company as treasury stock (other than
shares held for the account of clients, customers or other persons), (ii) each share of Common Stock held by Parent or by any subsidiary of either the Company or Parent and (iii) each
share of Common Stock held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares in accordance with Delaware law) will be
converted into the right to receive $90.00 in cash, without interest (the "Merger Consideration").
Outstanding
Company equity awards immediately prior to the consummation of the Merger will generally be subject to the following treatment:
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Each stock option that is outstanding immediately prior to the Effective Time will accelerate, vest and be cancelled as of the Effective Time
in exchange for a lump-sum cash payment equal to the product of (A) the number of shares of Common Stock subject to the stock option and (B) the excess, if any, of the Merger
Consideration over the exercise price per share of such stock option. Each stock option with an exercise price equal to or greater than the Merger Consideration will be cancelled immediately prior to
the Effective Time for no consideration;
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Each RSU that is outstanding immediately prior to the Effective Time, other than RSUs granted after the date of the Merger Agreement, will vest
and be cancelled as of the Effective Time in exchange for a lump-sum cash payment equal to the product of (A) the number of shares of Common Stock subject to such RSU immediately prior to the
Effective Time and (B) the Merger Consideration; and
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Each PSU that is outstanding immediately prior to the Effective Time and for which the performance period is complete will vest and be
cancelled as of the Effective Time in exchange for a lump-sum cash payment equal to the product of (A) the number of shares of Company Common Stock subject to such PSU based on actual
performance for the completed performance period and (B) the Merger Consideration. Each PSU, other than PSUs granted after the date of the Merger Agreement, that is outstanding immediately
prior to the Effective Time and for which the performance period is incomplete, will vest and be cancelled as of the Effective Time, with the holder entitled to receive a lump-sum cash payment equal
to the product of (A) the number of shares of Company Common Stock subject to such PSU based on target performance for the incomplete performance period and (B) the Merger Consideration.
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The Company may grant PSUs and RSUs after the date of the Merger Agreement but prior to the Effective Time in connection with its annual
practice of granting equity awards and as otherwise permitted by the Merger Agreement. Each such PSU and RSU that is outstanding immediately prior to the Effective Time will, as of the Effective Time,
convert into a RSU award tied to shares of Parent common stock (assuming target performance in the case of PSUs) that settles in cash upon satisfaction of the applicable vesting conditions (such
converted awards, the "Converted Parent RSUs"). Each Converted Parent RSU will remain subject to the same terms and conditions as the PSU or RSU to which it relates (including vesting) except that no
Converted Parent RSUs will be subject to performance-based vesting conditions.
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The
board of directors of the Company (the "Board") unanimously adopted and approved the Merger Agreement and the transactions contemplated thereby, including the Merger and, subject to
the terms and conditions of the Merger Agreement, resolved to recommend adoption of the Merger Agreement by its stockholders.
Under
the Merger Agreement, consummation of the Merger is subject to the satisfaction or waiver of certain customary closing conditions, including, among others: (i) the
affirmative vote (the "Company Stockholder Approval") of the holders of a majority of the Company's outstanding shares of Common Stock; (ii) the affirmative vote (the "Parent Shareholder
Approval") of a simple majority of Parent's shareholders at the Parent Shareholder Meeting (as defined in the Merger Agreement); (iii) the expiration or termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR") and the receipt of certain other non-United States regulatory approvals required to consummate the Merger; (iv) no
provision of any applicable law restraining, enjoining, prohibiting or otherwise making consummation of the Merger illegal; and (v) in the case of Parent's obligations to consummate the Merger,
the absence of a Company Material Adverse Effect (as defined in the Merger Agreement). Moreover, each party's obligation to consummate the Merger is subject to certain other conditions, including
without limitation: (x) the accuracy of the other party's representations and warranties contained in the Merger Agreement (subject to materiality qualifiers) and (y) the other party's
compliance with its covenants and agreements contained in the Merger Agreement in all material respects. Parent and Merger Sub's respective obligations to consummate the Merger are not subject to any
financing condition or other contingency.
The
Company has made customary representations and warranties and covenants in the Merger Agreement, including covenants regarding the conduct of the business of the Company prior to the
consummation of the Merger. Under the terms of the Merger Agreement, the Company is permitted to continue paying its regular quarterly dividend of up to $0.4125 per share of Company Common Stock per
quarter with record and payment dates consistent with the quarterly record and payment dates in 2016.
The
Merger Agreement contains a "No-Shop" provision, pursuant to which the Company is required to, must cause its affiliates, investment bankers, attorneys, accountants and other
advisors and representatives engaged in connection with the Merger and the other transactions contemplated by the Merger Agreement, and must use its reasonable best efforts to cause certain other
representatives to (i) immediately cease all existing discussions or negotiations, if any, with any third party with respect to any acquisition proposal and (ii) not, among other
customary restrictions, solicit alternative acquisition
proposals, engage in discussions with any third party related thereto, provide access to the Company's books and records or fail to recommend the Merger to its stockholders. Notwithstanding the
foregoing, if prior to receipt of the Company Stockholder Approval, the Company receives a written acquisition proposal that did not result from a breach of the Merger Agreement, under certain
circumstances, the Company and its representatives may engage in negotiations and discussions with the third party making such acquisition proposal and may provide such third party (after execution of
a confidentiality agreement meeting certain requirements) with non-public information relating to the Company. The Company is permitted to terminate the Agreement to accept a Superior Proposal if the
Board determines, after considering advice from its financial advisor and outside legal counsel, that a failure to take such action would reasonably be expected to be inconsistent with the Board's
fiduciary duties under Delaware law; provided, however, that the Company is not permitted to take any such action without first giving Parent certain customary rights to match such alternative
proposal. "Superior Proposal" is generally defined as an unsolicited acquisition proposal for a change of control transaction that did not result from a breach of the "No-Shop" restrictions, and that
the Board determines, after considering advice from its financial advisor and outside legal counsel, taking into account all
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circumstances
deemed reasonably relevant by the Board, is more favorable to the Company's stockholders from a financial point of view than the Merger.
The
Merger Agreement contains provisions giving each of Parent or the Company the right to terminate the Merger Agreement under certain circumstances including, among others, if the
transactions contemplated by the Merger Agreement are not consummated on or before September 10, 2017 (as may be extended to December 10, 2017 in the event the only conditions not to
have been satisfied or capable of being satisfied as of September 10, 2017 relate to competition laws) (the "End Date"), the Parent Shareholder Approval has not been obtained or the Company
Stockholder Approval has not been obtained. In addition, the Company can terminate the Merger Agreement if, among other things, the board of directors of Parent changes its recommendation that the
Merger be approved by the shareholders of Parent (the "Parent Board Recommendation") or, subject to Parent's rights to match such Superior Proposal, in order for the Company to accept a Superior
Proposal. Parent also has the right to terminate the Merger Agreement if, among other things, the Board changes its recommendation that the Merger Agreement be adopted by the stockholders of the
Company (the "Company Board Recommendation"), if the Board fails to publicly affirm the Company Board Recommendation in certain circumstances or if certain named persons have willfully and materially
breached the "No-Shop" restrictions or caused the Company, its subsidiaries or their respective representatives to materially breach the "No-Shop" restrictions, subject to a cure right for the
Company.
The
Company must pay a termination fee equal to $480,000,000 if (i) Parent terminates the Merger Agreement because (A) the Board changes the Company Board Recommendation or
fails to affirm the Company Board Recommendation in certain circumstances or (B) certain of the Company's representatives have willfully and materially breached the "No-Shop" restrictions or
caused the Company, its subsidiaries or their respective other representatives to materially breach the "No-Shop"
restrictions, (ii) the Company terminates the Merger Agreement to enter into a Superior Proposal or (iii) the Company or Parent terminates the Merger Agreement because (x) the
Company Stockholder Approval is not obtained or (y) the Merger is not consummated on or prior to the End Date other than as a result of a failure to obtain required regulatory approvals by such
date and (A) prior to such termination, a bona fide acquisition proposal has been publicly disclosed and not withdrawn and (B) within 12 months of such termination, the Company
closes a change of control transaction or enters into a definitive agreement with respect to a change of control transaction. If the Merger Agreement is terminated by the Company or Parent because the
Company Stockholder Approval was not obtained, the Company must pay an amount equal to all out-of-pocket costs, fees and expenses (including legal fees and expenses) incurred by Parent or any of its
affiliates in connection with the Merger Agreement and the transactions contemplated thereby subject to a cap of $20,000,000 (which reimbursement will reduce on a dollar for dollar basis any
termination fee subsequently payable by the Company). Parent must pay a termination fee equal to $480,000,000 if (i) the Company terminates the Merger Agreement because the board of directors
of Parent changes the Parent Board Recommendation or (ii) the Company or Parent terminates the Merger Agreement because the Parent Shareholder Approval is not obtained.
The
foregoing description of the Merger Agreement and the transactions and agreements contemplated thereby does not purport to be complete and is subject to, and qualified in its
entirety by, reference to the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1, and the terms of which are incorporated herein by reference.
The
Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company, Merger
Sub, Parent or any of their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Merger Agreement were made by the parties thereto only for purposes of
that agreement and as of specific dates; were made solely for the benefit of the parties to the Merger
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Agreement;
may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of
the Merger Agreement (such disclosures include information that has been included in the Company's public disclosures, as well as additional non-public information); may have been made for the
purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and
covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company's
public disclosures.