Baby formula makers hit the auction block

The baby formula industry is in crisis, as supply chain logjams and regulatory recalls have emptied U.S. shelves and panicked parents. Some top makers also are facing the added, and voluntary, complication of merger talks.

Driving the news: Reckitt Benckiser last month kicked off a sale process for what remains of the baby formula business it acquired five years ago via the purchase of Mead Johnson.

• This would include the popular Enfamil brand, with initial price talk for the unit ranging from $7 billion to $10 billion.
• Now it's looking much closer to the bottom of that range, with Bloomberg reporting that several big buyout firms have passed; in part "spooked" by the ongoing U.S. shortages. Clayton Dubilier & Rice is among the exceptions, having submitted a non-binding bid.
• Final offers had been expected by this week, but it's possible that London-listed Reckitt Benckiser will push the deadline.
• Reckitt Benckiser late last year sold its Chinese baby formula biz to private equity firm Primavera for $2.2 billion.

Elsewhere: Royal FrieslandCampina, a Dutch dairy cooperative with PE backing, earlier this year launched a $2 billion auction for its infant nutrition business, including the Friso brand. The last update was in March, with reported bidders including Baring Private Equity Asia and a group that included both Sequoia Capital China and the Junlebao Dairy Co.

• Bain Capital and Carlyle were both reported to have at least early interest in both the Reckitt Benckiser and Royal FrieslandCampina deals, but neither seems to still be involved.

What to know: Other major suppliers are keeping their infant formula efforts in house. This includes Abbott, which arguably caused this mess after four babies suffered bacterial infections from formula made in the company's Sturgis, Mich. factory, and Nestlé, which has been divesting other business lines.

The bottom line: Even the smoothest ownership changes cause some operational disruption, if only because of frayed employee nerves. Given the stakes, including for shareholders, there's a pretty strong case to put these sale processes on ice until supply shortages are solved.