Nestle Poised to Buy Pfizer’s Baby Formula

by Angela Nazworth | April 18, 2012 1:53 pm

Technically, the word on the street about Nestlé (PINK:NSRGY[1]) closing in on the deal to buy Pfizer‘s (NYSE:PFE[2]) infant nutrition unit for $10 billion is a rumor. Pfizer might announce the winning buyer as early as next week, but Nestlé appears to be closest to signing on the dotted line, according to a Reuters report[3].

If Nestlé does win the bid, the world’s largest food company will have bested Danone (PINK:DANOY[4]), a French food-products group also vying for the business. A sealed deal also would boost the Swiss-owned company to the No. 3 spot in the growing Chinese baby food market. There are approximately 16 million babies born in China each year, and the baby food industry in the country is expected to double by 2016, Reuters reports.

The baby food unit should feel more at home with Nestle, which is the world’s largest food and nutrition company[5]. Andrew Wood, an analyst at Sanford C. Bernstein, agrees. In a note to clients, he wrote, “This deal makes huge strategic sense for Nestle. It is in the right categories and the right markets and with a reasonable price we would expect a fairly positive reaction from investors,” according to Bloomberg[6].

Neither Nestle nor Pfizer stock moved much after the report. NSRGY shares were down less than a percent in the early afternoon, while PFE had gained about 1%.

Spokespersons from Danone and Nestlé have declined opportunities to comment on the bidding process.

Endnotes:
  1. NSRGY: http://studio-5.financialcontent.com/investplace/quote?Symbol=NSRGY
  2. PFE: http://studio-5.financialcontent.com/investplace/quote?Symbol=PFE
  3. Reuters report: http://www.reuters.com/article/2012/04/18/pfizer-nestle-babyfood-idUSL6E8FI4Y020120418
  4. DANOY: http://studio-5.financialcontent.com/investplace/quote?Symbol=DANOY
  5. world’s largest food and nutrition company: http://investorplace.com/2012/03/food-stocks-a-simple-yet-smart-investment/
  6. Bloomberg: http://www.bloomberg.com/news/2012-04-17/pfizer-said-to-pick-nutrition-unit-buyer-as-soon-as-next-week.html

Source URL: http://investorplace.com/2012/04/nestle-poised-to-buy-pfizers-baby-formula/
Short URL: http://invstplc.com/1aLFHPH