The joint venture, which will be held 50 percent by the Saudi company, will benefit from Almarai's in-depth knowledge of the region and Mead Johnson's capabilities and experience as the world leader in the infant nutrition category, says a posting on the Saudi Stock Exchange.
The joint venture will lease the new manufacturing facility currently under construction by Almarai and scheduled for commissioning in 2011.
A management team, drawn from both parent companies, will run the business on a day-to-day basis and will report to the board of the joint venture, which will be composed of representatives of both companies.
"This venture offers us a great entry point into the (Gulf), a market we had prioritized because of its size and attractive demographics -- with strong birth rates, above-average income levels and excellent potential for growth," said Steve Golsby, president and CEO of Mead Johnson, on the company website.
“From their leading position in key infant nutrition markets across the globe to their excellence in supply chain to their position as the leading innovator in the category, we consider Mead Johnson to be the perfect partner for Almarai,” said Abdulrahman Al-Fadley, CEO of Almarai.
Almarai, which has been diversifying its sources of revenue through acquisitions, recently acquired two companies in the Middle East and is looking at more opportunities in Egypt, after spending $115 million last year to buy an Egyptian dairy firm.
Almarai is also involved in joint ventures with Greece-based Vivartia, in the bakery business, and Pepsico, for dairy and fruit juice products.
Almarai's shares closed up 1.9 percent earlier on Tuesday, outperforming the bourse index which gained 0.7 percent.