Even though it remarked that the year ahead would be a “challenging” one, food giant Nestle is going to invest a healthy sum into acquiring Pfizer’s infant nutrition division in order to expand its global presence in the baby food business.
Nestle ended 2011 on a high, having $10.2 billion in profits, marking a 8.1 percent increase on the previous year, and 2012 too seems to be shaping up well for the Swiss company, as in a press release issued last week, Nestle announced that its 2012 sales had experienced a 5.6 percent increase from last year, reaching a total of $23.4 billion but added that while it was doing well in most parts of the world, it was facing challenges in emerging markets.
The new business deal between Nestle and Pfizer will see Nestle taking on board Pfizer’s existing brands of baby food, including S-26 Gold, SMA and Promil. Nestle was able to outbid rival Danone for Pfizer’s baby food portfolio, which went onto the market last July and while it still needs to gain regulators' approval, the deal will be costing the Swiss company $11.9 billion with the amount to be paid in cash.
Commenting upon the acquisition, Paul Bulcke, Nestle chief executive, said in a statement, “Pfizer Nutrition is an excellent strategic fit, and this acquisition underlines our commitment to be the world’s leading nutrition, health and wellness company,” while Pfizer chief executive Ian Read said, “The sale of the nutrition business to Nestlé is consistent with Pfizer’s intention to generate the greatest value for shareholders by maximizing the value-creation potential of our businesses and prudently managing our capital allocation,” according to a report by New York Times.
Pharmaceutical company Pfizer had been intending to sell off its baby food business, which it acquired from Wyeth in a $68 billion takeover in 2009, saying that it wanted to focus on its "core drug-making operations."
According to Nestle, the addition of Pfizer’s baby food products will add to its already established baby food business, which is quite considerable in Latin America, with the new products intended to make inroads in Asia and the Middle East, as Pfizer Nutrition is presently accounting for 85 percent of its business in these markets.
Nestle expects sales from this acquisition to amount to around $2.4 billion while implementation costs will be $300 million. The deal is expected to be finalized by June of next year.