Nestle near buying Pfizer’s baby formula

Nestle, the world’s biggest food group, is closing in on a deal to buy Pfizer’s infant nutrition business for up to $10 billion to boost its business in China and extend its lead in the world of formula milk for babies, sources familiar with the matter said on Wednesday.

By (Reuters)

Published: Wed 18 Apr 2012, 4:03 PM

Last updated: Tue 7 Apr 2015, 12:15 PM

The Swiss group had already been seen as favourite for the business, and is now set to seal a deal later this month after outbidding a joint team of Danone and Mead Johnson in a largely two-horse race.

“Nestle 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 $9-$10 billion and expected a deal by the end of the April.

The Pfizer unit is a high-growth $2.1 billion turnover business with over 70 percent 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 $68 billion 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 Vevey-based Nestle, 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 Nestle 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 Nestle. It is in the right categories and the right markets and with a reasonable price we would expect a fairly positive response from investors,” said analyst Andrew Wood at Bernstein.

Nestle shares were off 0.3 percent at 56.60 Swiss francs and Danone up 1 percent at 53.60 euros by 0835 GMT.

On Tuesday, the Wall Street Journal reported that Pfizer is near to selling the business to Nestle for at least $9 billion in a deal that could be announced as soon as next week.

The auction is being run out of New York with Morgan Stanley and Centerview Partners advising Pfizer.