Bloomberg News

Pfizer Said to Delay Formula Unit Sale as It Weighs Spinoff

September 14, 2011

Pfizer Said to Delay Formula Unit Sale as It Explores Spinof

Pfizer gained the formula division through its $68 billion purchase of Wyeth in 2009. Photographer: Munshi Ahmed/Bloomberg

Pfizer Inc. (PFE:US) is delaying a sale of its infant-nutrition business to give it more time to explore whether a tax-free spinoff will get more value for investors, said people with direct knowledge of the plans.

Pfizer may send sales documents to suitors in November at the earliest, two months later than potential buyers had anticipated, said the people, who declined to be identified as they aren’t authorized to speak on the matter. A sale may fetch as much as $10.5 billion and attract interest from companies including Danone (BN), Abbott Laboratories (ABT:US) and Nestle SA (NESN), people with knowledge of the process said in July.

The drugmaker, the world’s biggest, is concerned a sale may lead to an increased tax burden because it acquired the infant-nutrition unit less than three years ago, the people said. Pfizer may still opt to sell, they said. The company’s advisers are also still gathering information on the unit’s revenue and brands in Asia and other emerging markets, further slowing the process, said one of the people.

By starting an auction later, Pfizer may succeed in waiting out the turmoil now gripping equity and debt markets. Last month, companies raised the least amount of leveraged loans since 2008 amid the worsening European sovereign debt crisis and the first credit downgrade for the U.S.

“We continue to evaluate all structures, obviously with the goal of choosing the structures that will deliver the greatest after-tax value,” said Frank D’Amelio, Pfizer’s chief financial officer, at the Morgan Stanley Global Healthcare Conference in New York today. “From my perspective, we’re still doing the things we said we were going to do.”

Two-year Timeline

D’Amelio was responding to a question from Morgan Stanley analyst David Risinger about today’s Bloomberg News article on the delay. D’Amelio said any transaction would be completed between July 2012 and July 2013, consistent with the timeline previously disclosed by the company.

Pfizer shares increased 8 cents to $18.41 at 4 p.m. in New York Stock Exchange composite trading. The shares have climbed 7.8 percent in the past 12 months.

Mead Johnson Nutrition Co. (MJN:US), a competitor of Pfizer’s in baby formula, was spun off by former parent Bristol-Myers Squibb Co. in 2009. The stock has almost tripled since its trading debut, giving the Glenview, Illinois-based company a market value of about $14.8 billion.

Largest Deal

The Pfizer sale could be the largest of a vitamin or nutrition company in more than a decade, according to data compiled by Bloomberg. The biggest deal in that sector was Carlyle Group’s $3.8 billion acquisition of vitamin maker NBTY Inc. last year, the data show.

Pfizer disclosed plans to shed the business, as well as its animal-health division, more than two months ago. The New York-based drugmaker is receiving advice from Morgan Stanley and Centerview Partners on the infant-nutrition unit.

Pfizer gained the formula division through its $68 billion purchase of Wyeth in 2009. The unit, which reported $1.9 billion in sales last year, makes the SMA Gold line of products for infants and children and Enercal supplements for adults.

To contact the reporters on this story: Jacqueline Simmons in Paris at jackiem@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net.

To contact the editors responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net.


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Companies Mentioned

  • PFE
    (Pfizer Inc)
    • $29.39 USD
    • 0.01
    • 0.03%
  • ABT
    (Abbott Laboratories)
    • $42.24 USD
    • -0.11
    • -0.26%
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