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Nestle to buy Pfizer nutrition unit for $11.9 billion

By Tiffany Hsu, Los Angeles Times –

LOS ANGELES — Swiss food and nutrition giant Nestle SA will shell out $11.9 billion to buy Pfizer Inc.’s nutrition unit, which owns baby food brands such as SMA and Promil.

The division is expected to reel in $2.4 billion in sales this year and gets 85 percent of its revenue from emerging markets, whose large and rapidly growing populations are a key target for Nestle.

The Pfizer infant formula business is the fifth largest in the world, according to research group Euromonitor International, ranked behind Nestle, Mead Johnson Nutrition, Groupe Danone and Abbot Laboratories.

Nestle, which last year ranked as the most profitable corporation in the Fortune Global 500, owns infant product brands Gerber, Cerelac and Nan.

Last week, the company said that its first quarter sales were up 7.2 percent to 21.4 billion Swiss francs, or $23.3 billion. Growth was up 3.1 percent in developed markets such as North America, where expansion slowed due to weak consumer sentiment and higher pricing for products such as frozen foods.

But in emerging markets, sales were up 13 percent.

“As anticipated, 2012 is already confirming itself to be a challenging year,” said Nestle Chief Executive Paul Bulcke in a statement. “In many developed markets where consumer confidence is low, the trading environment is subdued whilst in most emerging markets, conditions remain dynamic and rich in growth opportunities.”

Overall first-quarter Nestle Nutrition sales, including infant formula and cereals, grew 5.8 percent to reach 1.9 billion Swiss francs, or $2.1 billion. Even slower or declining birth rates in developed markets didn’t dampen “dynamic growth in Asia, Africa and Latin America,” the company said.

Infant nutrition specifically is “a very attractive category,” both “high-value and high-growth,” Kurt Schmidt, Nestle’s head of nutrition, said in a conference call with analysts. The nearly $30 billion market is growing at 10 percent as affluence and awareness increases abroad, helping to boost product premiumization and diversification.

Bulcke, in the conference call, said the Pfizer nutrition unit “has a very strong brand portfolio. It has very good R&D capabilities, it has a very good geographical presence, and it actually helps to enhance our competitive advantages.”

The deal will need regulatory approval to go through.

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