Swiss group Nestle will take over the Nutrition division of the pharmaceutical giant Pfizer for $11.9 billion in cash, strengthening its position as world leader in food for infants, writes Bloomberg. Nestle anticipates that the acquisition will increase the profit of the group in its first full financial year following the merger and will strengthen company’s presence on emerging markets, which generates about 85% of sales at Pfizer Nutrition. Also, Nestle estimates that the acquired division will generate this year sales of $2.4 billion and will increase the group’s profit margin due to its exposure in emerging markets.
The Swiss group was considered the favorite to take over Pfizer Nutrition, mainly because of financial resources, and the fact that it was able pay for transaction in cash. The Swiss company is trying to revive its business on the Chinese market for baby food, which is in a steady decline since 2005, when it was forced to withdraw two varieties of milk powder after authorities found it to contain too much iodine. The world market of food for babies last year generated a turnover of $42.2 billion, of which 43% was recorded just in Asia-Pacific region, according to Euromonitor International.
Analysts say the price paid by Nestle is slightly too high, but the transaction has strategic value because it will strengthen the group’s position in Asia. The transaction represents the largest sale of operations conducted by Pfizer since 2006, when Johnson & Johnson took over several brands of pharmaceutical group, such as Sudafed and Bengay, for a total of $16.6 billion. Pfizer has put on sale in mid last year, its divisions of food for infants and pet care products, to focus on core activities related to the pharmaceutical industry.
Sources familiar with the matter told Bloomberg last week that the French group Danone and Nestle were also interested in the auction for Pfizer Nutrition.
Reply