Pfizer: Danone and Mead Johnson consider team-up for nutrition bid

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Danone and Mead Johnson are considering teaming up to bid for Pfizer’s nutrition business, as a way to address antitrust concerns that both players face in various parts of the world, two sources familiar with the matter told mergermarket, a lending source and a person with knowledge of the situation.

Teaming up with Mead Johnson is one of a number of options Danone is exploring to address antitrust concerns raised by its offer, said the two sources familiar with the situation, the person with knowledge and the lending source.

Danone and other bidders are talking to private equity firms which could pick up pieces of the business that raise antitrust issues, the first source familiar added. Nestle, thought to be the strongest bidder for the business, also has significant antitrust issues.

Pfizer has asked each bidder and their lawyers to submit detailed proposals on how they will resolve competition issues, the first source familiar also said. Pfizer is unlikely to make a decision on whether to go forward with the sale or to choose a winning bidder until it has reviewed the proposal, the first source also said.

Pfizer, Danone and Mead Johnson declined to comment.

Danone’s biggest trouble spots for antitrust are in the UK and Turkey, the first source familiar said. Mead Johnson’s biggest overlaps with Pfizer are in China, where Mead Johnson is the number one infant formula maker.

Chinese regulators are likely to block the company from acquiring the Pfizer business in the country, speculated an industry banker and an equity analyst.

At the same time, Pfizer is also accepting bids for some select geographic areas that raise particular antitrust problems for bidders, the first source familiar also said. There is market chatter that Pfizer’s nutrition business in the UK could be sold separately, the first source also said.

“While we continue to evaluate a variety of options for our nutrition business including a sale, spin off or other transaction, our preference remains to favor one overall option rather than dividing assets and business operations,” the Pfizer spokesperson said in response to a question about the company’s willingness to sell off pieces of the business separately.

Meanwhile, Heinz, which was thought to be a potential partner for Nestle, has dropped out of the process, said the first source familiar and the industry banker. Heinz submitted an indication of interest in the Pfizer sale process, but then left the process, the first source also said. Heinz declined to comment.

Heinz was thought to be a buyer for infant nutrition assets in Mexico, where Nestle is likely to have an overlap with the Pfizer business, said the first source familiar.

Danone and Nestle are the only real contenders for the Pfizer nutrition business, the first source said. Among the bidders, Nestle is in the strongest position to win the auction, said the second source familiar, the first and a second industry banker.

Analysts estimate Pfizer’s infant nutrition business is worth USD 10.5bn. A takeover of Pfizer’s nutrition business was always thought to be a stretch for Heinz and Mead Jonhson, which have market capitalizations of USD 17bn and USD 15bn, respectively.

Morgan Stanley and Centerview are advising Pfizer on the sale of its infant nutrition business.

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