Swiss group Nestle is to buy US drugmaker Pfizer’s baby food business.
The world’s biggest food company will have to pay more than it had expected – just over nine billion euros – for Pfizer Nutrition in order to beat out its French rival Danone.
Key to the high price is the fact that Pfizer Nutrition makes 85 percent of its sales in emerging markets where demand is growing.
“The price tag is high, however Nestle is securing a high growth/margin business with high exposure in the emerging markets. China will become the number three market for Nestle overall,” said Vontobel analyst Jean-Philippe Bertschy.
Nestle’s share fell; Danone’s shares rose as investors expressed relief that the French group would not have to borrow to pay a big price for Pfizer.
Nestle’s Chief Executive Paul Bulcke said it was premature to comment on competition issues, but analysts have speculated Nestle might have to sell 25 percent of the Pfizer unit by disposing of interests in Latin America, southeast Asia, Australia and South Africa, which could be bought by Danone or Heinz.