No pharma companies will get Danone's medical nutrition biz, because it is not for sale

For months analysts have been handicapping who might buy Danone's medical nutrition business. Hospira ($HSP) was cited as a possible buyer for tax inversion reasons and then Fresenius was said to want it, but was getting frustrated with protracted talks. It turns out, after 8 months of speculation, that no one will get it.

Danone CEO Emmanuel Faber

"We are keeping this business," board secretary Laurent Sacchi told Reuters. That confirmation followed a statement from Danone CEO Emmanuel Faber that, "Each of our core businesses--Fresh Dairy Products, Waters, Early Life Nutrition and Medical Nutrition--has a role to play."

The talk had been that Danone was interested in selling the unit to raise cash that could help the world's largest yogurt maker buy something more in line with its dairy and baby food operations. The medical nutrition business, which makes tube feeding products, is the smallest for Danone. It generates about €1.3 billion a year in sales, only 6.3% of the company's total, Reuters points out. A sale was expected to bring in up to $6.2 billion that Danone could use to buy something like U.S. infant formula maker Mead Johnson Nutrition Group ($MJN).

In July, U.S. intravenous drug specialist Hospira's name surfaced as a potential buyer. The Danone business was not only complementary to its own, but it might have been able to structure a buy as a tax inversion deal and cut its costs. Hospira never commented on the rumors but did not deny them, saying only "We're always looking at opportunities in the marketplace to drive shareholder value, and assess them based on many strategic and financial considerations." Two months later, the deal was supposedly scuttled, possibly by pressure against companies going the tax-inversion route. Several weeks ago, Reuters reported another potential buyer was about to pass. German healthcare company Fresenius was supposedly getting frustrated by how long it was taking to get a deal done.

At least some analysts see Danone's apparent about-face as a good thing for the company, since it means Danone is less likely to load up on debt. RBC Capital Markets analysts are among them, writing today: "The retention of the Medical Nutrition might be seen by some as negative, however, the more positive implication for us is that a major acquisition appears less likely."

- read the Reuters story

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