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April 23, 2012

US: Nestle acquires Pfizer baby food arm for US$11.85bn

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

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

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The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
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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.  

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Free Report
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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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