Danone vies with Nestlé to acquire Pfizer’s baby formula business

Nestlé and Danone have submitted their first round bids for Pfizer’s baby formula division, putting two leading European food companies in competition for the unit, which is present in more than 60 countries.

The sale of the unit, which produces the SMA Gold line of products for infants and children, as well as Enercal supplements for adults, is expected to fetch around $10.5bn.

Last September, Pzifer announced it may consider a tax-free spin-off of the unit and delayed sending the sales documents to potential buyers in order to evaluate whether it would offer more value to investors, Bloomberg reported.

Pfizer spokeswoman Joan Campion said the company is still exploring strategic alternatives for its nutrition business.

Currently, the company is pursuing the activities associated with evaluating all options it has, including sale, spin-off or other transaction, and expects to announce a decision by this year, Campion added.

Abbott Laboratories, which expressed its interest in the division in July 2011, said earlier this week that it was not taking part in the bidding process. In June, Nestlé had $8.3bn in cash, cash equivalents and short-term investments, more than twice the amount Danone had with $3bn.

Both the companies are expected to face antitrust issues in some markets if they acquire the unit as with this acquisition, Nestlé would hold more than 60% market share for baby formula in Australia, Mexico and other countries, while Danone would capture 80% market share in the UK, Turkey and New Zealand and more than 70% in Australia and Ireland.

Pfizer gained the baby food unit, which posted sales of $1.9bn in 2010, through its acquisition of Wyeth in 2009.