Pfizer reportedly near to sell infant nutrition unit to Nestlé

Pharmaceutical giant Pfizer is nearing an agreement to sell its infant nutrition business to Nestlé for $9bn, according to people familiar with the matter.

Nestlé seems to have been considered as the preferred bidder for the unit due to its huge cash reserves over Groupe Danone and Mead Johnson Nutrition, which agreed for a joint bid.

Pfizer and Nestlé are likely to announce the deal next week, reported The Wall Street Journal.

Analysts suggest that Nestlé could face antitrust issues if it should acwuire the unit, and that it may have to sell portions of the unit in Latin America, Southeast Asia and South Africa.

Heinz chief executive William Johnson reportedly said at a conference in February that he might be interested in acquiring pieces of Pfizer’s nutrition business if they became available for antitrust reasons.

Last July, Pfizer put its animal health and nutrition businesses for sale as part of its strategy to focus more on drug development, after losing patent protection for cholesterol drug Lipitor.

In 2010, the drug company said that it was exploring strategic alternatives for nutrition business including a tax-free spin-off and expected to close any deal between July this year and July 2013.

Pfizer holds 6% market share in global infant formula business, while Nestlé, a leader in the category, holds 17%.

The infant nutrition business, which became a part of Pfizer following its acquisition of Wyeth in 2009, sells baby formula and maternal supplements and owns formula brands such as SMA Gold and Promil Gold.

The business generates 70% of its sales from emerging markets and has revenues of $2.1bn with an annual growth rate of 8%.

Pfizer’s infant nutrition business faces competition from Danone, Nestlé, Mead Johnson and Abbott Laboratories.

The agreement may not be considered final as last minute hurdles could affect the deal.