Pfizer Said to Be Near $11 Billion Unit Sale to Nestle

Pfizer Inc. (PFE), the world’s largest drug maker, is near an agreement to sell its infant-nutrition business to Nestle SA (NESN) for about $11 billion, said people with knowledge of the matter.

An announcement may come as soon as today, said the people, who declined to be identified because the matter is private. Nestle was chosen on April 22 over Danone SA (BN), which also bid about $11 billion, one of the people said.

The purchase will help Nestle, already the top seller of infant-nutrition products, regain traction in the Chinese baby- food market where Pfizer has a 7 percent share. Nestle has been losing market share in the country since 2005, when it withdrew two varieties of Neslac milk powder because authorities found they contained excessive iodine. China accounted for about 23 percent of the 30.9 billion euro ($41 billion) market for baby- food products in 2011, according to Euromonitor International.

The sale would be Pfizer’s largest divestiture since the $16.6 billion sale of consumer health brands including Sudafed cold medicine and Bengay pain cream to Johnson & Johnson in 2006. It is the first of two major exits that Pfizer Chief Executive Officer Ian Read outlined to shrink the New York-based company and concentrate its efforts on producing new drugs. Pfizer was close to choosing between Nestle and Danone, people knowledge of the deal said last week.

“This deal makes huge strategic sense for Nestle,” Andrew Wood, an analyst at Sanford C. Bernstein, wrote April 18 in a note to clients. “It is in the right categories and the right markets and with a reasonable price we would expect a fairly positive reaction from investors.”

Infant Nutrition Benefits

Pfizer has “no comments at this time,” said Trupti Wagh, a Singapore-based spokeswoman for the company. Two calls made outside of business hours to Nestle’s corporate media relations line in Switzerland went unanswered.

Pfizer’s business includes infant formulas such as SMA and Promil. The unit, which also makes Enercal supplements for adults, offers products in more than 60 countries, according to its website, and accounted for 3.2 percent of the company’s 2011 revenue. Pfizer gained the formula division through its $68 billion purchase of Wyeth in 2009.

Pfizer had the fifth-largest global market share of the infant formula business in 2010, trailing Nestle, Mead-Johnson Nutrition Co. (MJN), Danone, and Abbott Laboratories, according to Lee Linthicum, an analyst with Euromonitor in London. Its market positions are strongest in the Middle East and Africa, and in the Asia-Pacific region, where Pfizer’s unit is the third- and fourth-largest respectively, Linthicum said.

Photographer: Gianluca Colla/Bloomberg

A logo sits on display at Nestle SA's new production unit for probiotic infant formulas in Konolfingen, Switzerland. Close

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Photographer: Gianluca Colla/Bloomberg

A logo sits on display at Nestle SA's new production unit for probiotic infant formulas in Konolfingen, Switzerland.

Global sales of baby-food products are likely to gain 6 percent a year from 2011 to 2016, helped by low private-label penetration and the importance of infant nutrition to consumers, according to Euromonitor.

To contact the reporters on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Zachary R. Mider in New York at zmider1@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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