The world’s largest food company Swiss-based Nestle SA is buying Pfizer’s infant nutrition unit for $11.9 billion, once given the green light from antitrust regulators.
Nestle beat out an $11 billion offer by Groupe Danone, and Mead Johnson Nutrition Co. also bid unsuccessfully. The deal is approximately 19.8 times greater than the unit’s 2012 estimated pretax profit.
The unit has been for sale since last July along with Pfizer’s animal-health business unit; the pharma giant wants to sell both units to focus exclusively on pharmaceuticals. Pfizer acquired the infant nutrition unit in 2009 when it took over Wyeth for $68 billion.
Nestle’s Chief Executive Paul Bulcke says infant nutrition has been part of the company since 1866, and that the purchase will enhance its global position, adding: “Pfizer Nutrition is an excellent strategic fit, and this acquisition underlines our commitment to be the world’s leading nutrition, health and wellness company.”
Pfizer’s infant nutrition unit includes Promil and SMA formulas as well as Enercal adult supplements. The products are sold in 60 countries and online.
Growth Expected In Emerging Markets
Currently, Pfizer’s infant nutrition unit generates 85% of revenue from developing countries. Combined with Nestle, the business is expected to hold a 38% market share in Africa and the Middle East, and a 10% market share in China.
Nestle is already the top seller of baby food products, but has been slipping in the Chinese market since 2005. Pfizer has the world’s fifth-largest market share.
Industry analysts agree the purchase makes strategic sense for Nestle as it expands in Asia. It also marks Nestle’s largest acquisition to date and Pfizer’s largest sale since 2006, when it sold its Sudafed and Bengay brands to Johnson & Johnson.
According to Euromonitor International, globally the baby food market is expected to grow 10% per year through 2016. This growth is aided by a global increased awareness of infant nutrition and low-priced private labels.
Key Statistics - Global Baby Food Market (source: MarketLine)
- In 2010, the baby food market generated revenue totaling nearly $10.5 billion globally. This represents, for the period spanning 2006-2010, a compound annual growth rate (CAGR) of close to 5%.
- In 2010, the most lucrative segment of the global baby food market was bottled baby food, which saw sales revenue totaling $5 billion for the equivalent of nearly 48% of the market's overall value.
- For the five-year period 2010-2015, the performance of the market is predicted to accelerate, and by the end of 2015, the market should be valued at more than $13 billion.