Nestlé Wins Battle For Pfizer Unit With $11.9bn Deal

Pfizer has agreed to sell its baby food unit to Nestlé, in a deal worth $11.9bn, giving the Swiss food giant a major boost in emerging markets across the world.

With 85% of Pfizer’s sales in emerging markets – the deal will complement Nestle’s existing infant nutrition business perfectly. The sale marks Pfizer’s largest divestiture since it divested some consumer health brands to J&J in 2006 for $16.6bn. The unit owns infant formulas such as SMA and Promil, and also makes Enercal supplements for adults. It has a network in more than 60 countries, and was the world’s fifth-largest maker of infant formulas in 2010.

Implications:

• As the No.1 food company in many countries, Nestlé are accustomed to, and will have anticipated issues raised by anti-trust/monopoly legislation.
• This step to full global coverage will enable the company to develop and sustain a fully global strategy for the combined brands in baby food.
• However, given that the company will probably take its time integrating the two operations in order to secure a smooth transition for the companies and the trade (the 1988  Nestlé–Rowntree integration took several years), this may give competitor brands some time to adjust to the new category dynamics…although a couple of what-ifs this morning might be a wise precaution...