In a juicy bit of M&A action, Nestlé has decided that buying the baby milk producer for $11.85bn (£7.36bn) will be a ‘perfect’ complement to its existing infant foods business. The firm cooked up a better bid than rival bidder Danone, and is on the verge of adding $2.4bn in Pfizer sales to the Nestlé group.
Financially, the deal could open a few doors for Nestlé. About 85% of Pfizer Nutrition’s sales are in emerging markets, making the deal a tasty addition to the Nestlé’s portfolio of brands. Emerging markets will be increasingly important to the firm since it announced last week that trading in developed markets had been ‘subdued’.
The transaction is still subject to regulatory approval, but if it goes through, it will mean Pfizer’s S-26 Gold, SMA and Promil brands join forces with Nestlé’s Nan, Gerber, Lactogen, Nestogen and Cerelac infant cereals, making it even more of an infant-foods powerhouse.
Shareholders were not ravenous for the deal however. Nestlé’s share price dipped 3% following the announcement earlier today. Such an expensive acquisition may not sit well in the stomach of investors, but for the sake of its long-term future, the world’s largest food producer needs to take a bigger piece of the pie in those rapid growth markets – or risk being left behind.