Wednesday, April 09 2008
Speculations on the sale of Mead Johnson Nutritional business are heating up again. Nestle SA, a Swiss multinational food conglomerate is mentioned as a possible buyer for this division of Bristol-Myers Squibb. Even though the world wide nutritional markets are not exactly performing at stellar levels, the purchase for Mead Johnson Nutritional only makes sense is you have world wide distribution systems in place. We hope that the end result will keep Mead Johnson Nutritional in Evansville.
Mead Johnson may be in Nestle's sights
Ever since Bristol-Myers Squibb said it was trying to decide what to do with its Mead Johnson Nutritionals business, speculation has arisen that Nestle may want to buy it.
On Monday, Nestle SA obtained the large amount of cash it would need to make such a purchase. The Swiss food company agreed to sell its Alcon subsidiary to Novartis, a Swiss drug company. The deal, to be completed in two installments, will eventually net Nestle about $39 billion. That is far more than enough to buy Mead Johnson, an Evansville maker of Enfamil and about 70 other food products.
In December, James Cornelius, president and chief-executive officer of Bristol-Myers, said he was concerned that subsidiaries such as Mead Johnson and ConvaTec, a maker of skin and wound treatments, did not complement a drug company. Bristol-Myers, he said, would be considering “strategic alternatives” for those businesses.
Representatives of Nestle could not be reached for this article. They told the Wall Street Journal the company would likely first spend money from the sale of Alcon on small acquisitions.
Nestle and Novartis have made a number of deals in attempts to concentrate themselves more on their respective specialties. In September 2007, Nestle bought Gerber Products, a maker of baby food, from Novartis for about $5.5 billion. In July of the same year, it bought Novartis Medical Nutrition for about $2.5 billion.
Alan Newman, senior-vice president with Hilliard Lyons, said the current credit troubles would make it difficult for a company to get a loan to buy Mead Johnson. The sale of Alcon at least gives Nestle the needed money.
“A buyer that’s armed with cash and that has a good strategic fit makes even more sense to me,” he said.
Buying Mead Johnson would seem to suit Nestle’s plan of becoming a leading food company.
As the price of staple foods rises, Nestle has come to depend more and more on its nutritional business, which enjoyed sales of about $10.9 billion in 2007. And Mead Johnson has performed well in recent years.
In 2007, it saw sales of $2.6 billion, more than any other Bristol-Myers subsidiary. That was up from the $2.3 billion it had had in sales the previous year.
Nestle is not the only company that has been buying up baby-food companies in recent years. In November 2007, the French company Groupe Danone paid about $16.8 billion to complete its purchase of Numico, a Dutch maker of baby food.