Nestlé to buy Pfizer’s infant nutrition unit

ZURICH—NESTLÉ SA said Monday it has agreed to pay $11.85 billion to acquire Pfizer Inc.’s infant nutrition business, a deal that is expected to help the Swiss food giant expand in emerging markets and cement its leading position in the global baby-formula market. The deal is Nestlé’s largest since January 2001, when it bought U.S. pet-food company Ralston Purina f or around $10 billion. Nestlé beat off competition from Danone SA and Mead Johnson Nutrition Co. for the business, whose main products include SMA Gold infant formula. “Pfizer Nutrition is an excellent strategic fit and this acquisition underlines our commitment to be the world’s leading nutrition, health and wellness company,” Nestlé Chief Executive Paul Bulcke said in a statement. “Its strong brands and product portfolio, together with its geographic presence will complement our existing infant nutrition business perfectly.” The acquisition, which is subject to regulatory approval, will be accretive to the Nestlé model both for growth and margins, as well as the group’s earnings per share in the full first year, it said. Nestlé estimates the acquired business’s 2012 sales at $2.4 billion, 85% of which are generated in emerging markets, many of them with large, fast-growing populations.

It ranks No. 5 globally in the i nfant milk formula market—the world’s fastest-growing packaged food cate gory. “The purchase price looks high at first glance, but given t he deal is likely to be EPS positive in the first year, and the higher margins at the Pfizer unit, the price is probably justified,” said Patrick Schwendimann, an analyst at Zuercher Kantonalbank. Nestlé is the leading seller of milk formula for babies, with a 17% share of the $27 billion global market in 2010, followed by Mead Johnson with 15% and Danone with 13%, according to the most recent data from research firm Euromonitor International. The acquisition is likely to help Nestlé expand its presence in China, one of the biggest markets for infant nutrition, a person familiar with the matter said.