Nestlé set to buy Pfizer’s infant focus
The Swiss group had already been seen as favourite for the business which includes a nutritionals plant, in Askeaton, Co Limerick, and is set to seal a deal later this month after outbidding a joint team of Danone and Mead Johnson in a two-horse race.
“Nestlé is in the lead position and is closing in on a deal which we expect soon,” said one source.
Another source said the business would fetch $9bn-$10bn and expected a deal by the end of the April.
If Danone loses out, analysts say the French group will face a problem of how to expand, with its chief executive, Franck Riboud, saying it did not have the firepower to mount big deals which would seem to rule out a move for Mead Johnson.
The Pfizer unit is a high-growth $2.1bn turnover business with more than 70% of sales in emerging markets and a key position in China, and has attracted the attention of the three largest players in the infant milk formula sector.
Pfizer put the business up for sale last July following its $68bn purchase of Wyeth in 2009, while it is also looking to offload its animal health business and says this is more likely to be spun off than sold outright.
A spokesman for Nestlé, which holds its annual general meeting in Lausanne on Thursday and releases first-quarter sales figures on Friday, said “we never comment on market rumours”.
Analysts said if the deal is concluded it would be positive for Nestlé and also may help Danone’s shares as there has been concern that the French group might pay a huge price for the business and massively leverage up its balance sheet.
“Overall, this deal makes huge strategic sense for Nestlé,” said analyst Andrew Wood at Bernstein. “It is in the right categories and the right markets and with a reasonable price we would expect a fairly positive response from investors.”
The Pfizer business with its SMA Gold brand ranks as world number five in the infant milk formula market — the world’s fastest-growing packaged food category — after Nestlé, Mead Johnson, Danone and Abbott Laboratories. It is growing sales at 8% a year and has some 60% of its revenue in Asia, 30% in Europe, largely in Britain, and some 10% in Latin America.
More than a quarter of its sales are in China, where the $6bn market is expected to double by 2016, having grown at more than 20% over the last five years to feed 16 million newborns a year. A Pfizer deal would push Nestlé to third in the Chinese market behind Mead Johnson and Danone from its current relatively small presence.
Nestlé, whose main baby milk brand is NAN, is likely to have to sell 25% of the Pfizer unit’s sale by disposing of interests in Latin America, south-east Asia, Australia, and South Africa, which analysts say could be bought by Danone or Heinz , although Bernstein’s Wood says the selloff figure could be as high as 35% of annual sales.
Danone has always declined any comment, but Riboud said in February he was interested in acquisitions but did not have the firepower for deals on the scale of its €12.3bn acquisition of baby food group Numico in 2007.
— Reuters
