Nestlé and Danone outline antitrust plans for Pfizer’s baby formula unit

Swiss food company Nestlé and French dairy company Danone are working out strategies to overcome antitrust issues following the submission of their initial bids to acquire Pfizer’s baby formula division, which is valued at $10bn.

Nestlé is planning to acquire all of Pfizer’s baby formula assets and then auction some of the assets that cannot be retained due to regulatory competition concerns, according to Bloomberg.

Regional companies and competitors may seek to buy the assets auctioned by Nestlé in countries where the Swiss firm would face regulatory hurdles.

Meanwhile, Danone is considering a joint bid with Mead Johnson, a US-based manufacturer of paediatric nutrition products, and may split the division along brands or geographies.

The joint bid may also make it easier for Danone to secure financing and lower its risk of taking on too much debt.

Both companies will reportedly present their respective plans to Pfizer in the coming weeks.

The two companies are expected to face antitrust issues in some markets if they acquire the unit; Nestlé would hold more than a 60% share in the baby formula markets of Australia, Mexico and other countries, while Danone would capture an 80% market share in the UK, Turkey and New Zealand, and more than 70% in Australia and Ireland.

Pfizer spokeswoman Joan Campion said the company has not made a decision on the infant-nutrition unit, and it is still in the process of exploring its options, which include a sale, spinoff or other transaction.

The company expects to announce a decision on the process in 2012 and complete any transaction between July 2012 and July 2013, Campion added.

Pfizer, which gained the baby food unit through its acquisition of Wyeth in 2009, is divesting its animal health and nutrition businesses as part of its strategy to focus more on drug development.