The contest for Pfizer's nutrition unit is heating up. Mead Johnson, the baby-formula business spun off by Bristol-Myers Squibb ($BMY) in 2009, has teamed up with the French food giant Danone on a bid. The two companies will together take on Nestle ($NSRGY), which remains the other front-runner for the deal.
Pfizer ($PFE) decided early last year to sell or spin off the unit as it streamlines operations and focuses more narrowly on the drug business. The first round of bids came in late last year, and although Pfizer hasn't been saying much about the potential deal, there's been a steady stream of talk from insiders, not only about the bidding, but about any asset sales that might follow to satisfy antitrust regulators.
As Reuters reports, sources figure Nestle still has the upper hand for the next round of bids, which are due March 5. One investment banker told the news service that Nestle has "deeper pockets" and that, as a single bidder, would be easier for Pfizer to work with. "We do believe the Pfizer asset may well be Nestle's to lose," Barclays Capital analyst Jane Gelfand told Reuters.
One of the plums in the deal is Pfizer's baby-formula business in China, which is growing fast. Nestle doesn't have much of a presence in that key market, while Danone could use the Pfizer products to beef up the higher end of its range, Reuters notes. Both would have to sell off assets to make regulators happy. Earlier this week, Heinz told the Financial Times that it's not interested in Pfizer's entire nutrition business, but that it might pick up bits and pieces to add to its own baby-formula portfolio. "Any antitrust considerations could ultimately work to the favor of other infant nutrition competitors," Gelfand said.