US: Nestle acquires Pfizer baby food arm for US$11.85bn
By Katy Askew | 23 April 2012
Nestle has agreed a deal to acquire the infant nutrition business of US pharmaceuticals group Pfizer for US$11.85bn.
The sale of the business attracted competing bids from Nestle and Danone, as well as some private equity interest.
Announcing the acquisition this morning (23 April), Nestle said the Pfizer business was an "excellent" strategic fit with the company.
Pfizer's infant nutrition unit offers a "complementary portfolio" of "high-quality" brands, "pioneering" R&D capabilities and good access to emerging markets, with 85% of revenues generated in emerging markets, Nestle said.
Speaking during a conference call following the announcement, CFO Wan Ling Martello said the business has a "proven track-record of profitable growth". Nestle estimated that the unit will generate sales of $2.4bn in 2012, up from $2.2bn last year and $1.9bn in 2010.
According to Martello, Pfizer Nutrition generated EBITDA of $500m in 2011, with an EBITDA margin of 25%. In 2012, Nestle estimates EBITDA will total $600m, again with an EBITDA margin of 25%.
The acquisition price therefore represents 19.8x 2012 estimated EBITDA. Martello said that the acquisition would be funded through a combination of cash on hand and debt, insisting Nestle would maintain its "strong balance sheet".
Management revealed Nestle expects to generate synergies totalling $160m over the next two to four years.
Martello added the deal is expected to be accretive to earnings per share in the first full-year that it contributes to the company.
Upon completion, Nestle's portfolio of infant nutrition brands, such as Nan, Gerber and Lactogen, would include Pfizer's brands like S-26 Gold, SMA and Promil.
"The combined entities will enable us to deepen our engagement with consumers, offering them a wider choice of nutritious food to ensure their children make a healthy start to a healthy life," Nestle CEO Paul Bulcke said.
The deal is subject to regulatory approval.
Sectors: Baby food, Mergers & acquisitions
Companies: Nestle, Pfizer, Danone
View next/previous articles
23 Apr 2012 -
23 Apr 2012 -
Currently reading -
US: Nestle acquires Pfizer baby food arm for US$11.85bn
23 Apr 2012 -
Related research
Nestle (Malaysia) Bhd (NESTLE) - Financial and Strategic SWOT Analysis Review
Nestle (Malaysia) Bhd (Nestle Malaysia) is a food and beverages company. The company, its undertakes manufacturing, marketing, and sale of instant noodles, chocolate confectionery products, cereals, culinary products, ice-cream, liquid milk, powdere...
Nestle SA (NESN) - Financial and Strategic SWOT Analysis Review
Nestle SA (Nestle) is one of the world's leading nutrition, health and wellness companies. Being the holding company of the Nestle Group, it operates through its subsidiaries, associated companies and joint ventures across the world. The company has ...
Nestle Pakistan Limited: Consumer Packaged Goods Company Profile, SWOT & Financial Report
Canadean's "Nestle Pakistan Limited: Consumer Packaged Goods Company Profile, SWOT & Financial Report" contains in depth information and data about the company and its operations. The profile contains a company overview, business description, competi...
Related articles
Quote, unquote: just-food's week in words
Rivals Danone and Nestle both released their third-quarter sales results this week. Both spoke of struggles in Southern Europe, and Spain in particular where firms are suffering amid the Euro-zone's debt crisis. Elsewhere, there was plenty of M&A activity with the acquisition of Gläserne Molkerei by Emmi's organic business.
On the money: Nestle sees North America trend improvement
Nestle has said it is seeing positive trends resulting in market share gains in North America, where depressed consumer sentiment has proven problematic for the Swiss food giant through the beginning of this year.
Read more on this hot issue
Nestle moves to buy Pfizer's baby food arm
The world's largest food manufacturer beat off reported interest from Danone with a deal worth US$11.9bn. But has the Swiss food giant paid too much?
There are currently no comments on this article
Be the first to comment on this article