MEXICO/AUS: Anti-trust concerns hit Nestle-Pfizer deal

By Michelle Russell | 22 November 2012

Nestle agreed a deal to acquire the infant nutrition business of US pharmaceuticals group Pfizer for US$11.85bn in April

Nestle agreed a deal to acquire the infant nutrition business of US pharmaceuticals group Pfizer for US$11.85bn in April

Nestle's acquisition of Pfizer's infant nutrition has been blocked by Mexico's anti-trust authority and had conditions attached to it by Australia's competition regulator.

In a filing yesterday (21 November), Mexico's Federal Competition Commission (CFC), said it voted four-to-one to reject the acquisition.

Australia's antitrust regulator yesterday attached a condition to its approval of the deal, requiring it to license the brand portfolio in Australia to an approved independent purchaser.

Mexico's CFC said the companies have 30 working days to lodge an appeal and, "if they so choose", submit a new proposal.

Nestle agreed a deal to acquire the infant nutrition business of US pharmaceuticals group Pfizer for US$11.85bn in April.

The CFC, however, said the acquisition would give Nestle 70.6% of the Mexican market for so-called stage-one and -two formula and 88.2% of the market for stage-three formula.

Nestle would be able to raise prices of its different brands between 2.9% and 11.5%, also giving competitors room to raise their prices to a lesser extent, the CFC added.

"The Plenum of the Federal Competition Commission (CFC) decided not to authorise the acquisition of the nutrition business line in Mexico of Pfizer Inc. by Nestle, considering that the notified transaction imposes real and substantial risk to competition and free competition.," it said in the filing.

The Australian Competition and Consumer Commission said it "would not oppose" the proposed acquisition, but said it required Nestle to accept a court enforceable undertaking to appoint a purchaser for the branded portfolio approved by the regulator.

"The ACCC had significant concerns that without the undertaking, the proposed acquisition would further increase concentration in already concentrated markets, where barriers to entry and expansion are high," ACCC chairman Rod Sims said.

"If the proposed acquisition were to proceed in Australia, the number of major suppliers of infant formula and toddler milk in each of the distribution channels would be reduced from three to two, and our inquiries indicated that this would be likely to substantially lessen competition in the supply of infant formula and toddler milk."

Nestle did not return a request for comment on either ruling.

Sectors: Baby food, Mergers & acquisitions

Companies: Nestle, Pfizer

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