Pfizer's plans to sell its baby food business is likely to spark a bidding war between Nestle, Danone and HJ Heinz, according to one analyst.

Pfizer announced on Thursday (7 July) that it is considering "strategic alternatives" for its animal health and nutrition businesses. Options on the table include a full or partial separation of the divisions through a spin-off, sale or other transaction. Given the distinct nature of the two businesses, it may pursue a different strategy for each business, the pharmaceutical group added.

MF Global analyst Andy Smith said today (11 July) that the news was "likely to lead to a bidding war" for Pfizer's baby food unit. He added that Nestle, Danone and HJ Heinz were likely to be "at the forefront of the bidding".

Smith said Nestle would be a good "fit" with Pfizer's baby-food division. When contacted by just-food for a reaction, the Swiss food giant declined to comment.

The MF Global analyst claimed that an acquisition the Pfizer assets by Danone would "almost certainly" run into anti-trust issues in Australia and the UK, where the companies' combined baby-food operations would have over 70% of the market.

However, Smith said a deal between Pfizer and Danone would be accretive to the French food group's 16% share of the market in China and give it a presence in Mexico, a country where it has "no meaningful presence".

Smith said Danone could gear up to a net debt to EBITDA ratio of around 3.7x to do the deal, which would "not require equity insurance". He said that a deal would see its net debt increase from a 2x net debt to EBITDA ratio to 3.4x.

Nevertheless, he added: "We feel that investors may view such a strategic deal poorly given the current emphasis on organic growth."