Nestle SA (NESN) may sell as much as $1.8 billion of the infant-nutrition assets it is buying from Pfizer Inc. (PFE) as antitrust concerns in countries such as Mexico force divestitures, said people with knowledge of the matter.
About 10 percent to 15 percent of the $11.9 billion unit may be put up for sale by Nestle, said the people, who declined to be identified because the discussions are private. The Vevey, Switzerland-based company has overlapping baby-food businesses in more than a dozen countries and may eventually have to sell divisions in places including Australia, Venezuela and Thailand, the people said.
Nestle, the world’s biggest foodmaker, plans to meet with regulators in the countries where it operates during the coming weeks and months to determine which assets it may have to divest, the people said. Some private-equity funds and consumer- product companies such as HJ Heinz Co. (HNZ) or Abbott Laboratories may be interested in these assets when they come on the block, the people said.
“It is premature to comment on and prejudge the decisions of the regulatory authorities,” Robin Tickle, a Nestle spokesman, said by telephone.
A forced sale of assets in Australia and some Latin American countries could help companies that are looking to expand in those regions, Credit Suisse Group AG analysts Robert Moskow and Marcela Giraldo said in a report last week.
Heinz Chief Executive Officer William R. Johnson said in February that the Pittsburgh-based company would consider “bolt-on acquisitions in emerging markets to accelerate growth,” though it has been primarily focused on organic expansion. Michael Mullen, a Heinz spokesman, declined to comment beyond Johnson’s remarks.
Adelle Infante, an Abbott spokeswoman, declined to comment.
The assets Nestle may need to sell have annual earnings before interest, taxes, depreciation and amortization of $60 million to $90 million, the people said. They may fetch $1.2 billion to $1.8 billion based on the multiple Nestle is paying for the entire unit.
Nestle is already the top seller of infant-nutrition products and the purchase of Pfizer’s business will help the company regain traction in the Chinese baby-food market, where it has been losing market share since 2005. The Pfizer unit gets about 85 percent of sales from emerging markets such as Asia, Africa and the Middle East.
Pfizer picked Nestle to buy the infant-nutrition unit over Danone SA, which had even greater antitrust hurdles, especially in China, people familiar with the matter said. Danone had previously tried to partner with Mead Johnson Nutrition Co. in a deal that would have pre-sold some of the Pfizer assets where there was risk of overlap, said these people. The talks between Danone and Mead Johnson had broken down by the final round of bidding, the people said.
“We look at both organic and external growth opportunities, but we do not speculate on specific actions, investments or geographies,” Chris Perille, a spokesman for Mead Johnson, said in an e-mailed statement.
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