Nestle is the most likely candidate to acquire the infant nutrition arm of US pharmaceutical group Pfizer, analysts have suggested. 

Pfizer has confirmed that it is “considering options” for its Wyeth baby food business – including sale or spin-off – and the unit has effectively been on the market since mid-2011. 

Market speculation has focused on the likelihood of European food majors Nestle or Danone securing a deal to acquire the business, with US firm Mead Johnson also cited as a potential suitor. Private-equity interest is believed to be in the running to pick up assets that could be sold after the deal, as any buyer would be forced to sell off parts of the business to settle antitrust concerns. 

According to reports, Pfizer is expected to announce a sale valued at between US$9bn and $10bn next week. Nestle and Danone are both being touted as potential buyers. 

However, analysts at Kepler Capital Markets have suggested it is unlikely that Danone will look to take full control of the unit. 

“We expect the company to pick up some pieces of Wyeth (mainly Latin America) but not launch a full bid,” the analysts wrote in a note this morning (18 April). 

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If Nestle were to acquire Pfizer’s baby food business, Bernstein analyst Andrew Wood has also suggested Danone could benefit from the deal by acquiring some smaller parts of the unit in order to assuage competition concerns. 

“We estimate that Nestle could potentially face anti-trust issues in a number of key markets, including Saudi Arabia (combined 43% share), Mexico (combined 69% share), the Philippines (43% combined share) and Australia (combined 62% share),” Wood said. “We would estimate that up to about 35% of sales of the Pfizer Nutrition business could be at “high-risk” of requiring some anti-trust remedies.”

Wood added a sale to Nestle would likely boostr Danone’s share price, as it would assuage investor fears that the French firm will replay history by paying over the odds for the business, over-leveraging the balance sheet as management did in 2007 with its Numico acquisition. 

From Nestle’s perspective, Wood said the acquisition “makes huge strategic sense”, given Pfizer’s presence in high-growth emerging markets and its focus on high-margin infant formula. 

“It is in the right categories and the right markets and with a reasonable price (17-18x EBITDA would be “reasonable”), we would expect a fairly positive reaction from investors,” Wood said.