October 25, 2011

China's largest dairy firm Mengniu Dairy Co Ltd is planning to bid for Pfizer's infant-nutrition business, a unit that has been put for sale by the pharmaceutical giant in July, according to reports.

Pfizer Nutrition was acquired as part of its US$68-billion takeover of Wyeth less than two years ago. The business had revenues of US$1.9 billion last year, which could value the business as much as US$10 billion.

Based in Inner Mongolia and listed on the Hong Kong Stock Exchange, Mengniu Dairy, backed by state giant COFCO Corp, was eyeing an offer for Pfizer Nutrition.

In early July, New York-based Pfizer had announced plans to sell or spin off its animal and nutrition units. It was considering options including, among others, a full or partial separation of each of these businesses from Pfizer through a spin-off, sale or other transaction.

The unit may draw companies including Danone, Nestle, Mead Johnson and Heinz, reports said.

Pfizer Nutrition operates in six continents and sells its products in more than 60 countries, with a focused presence in key markets throughout Asia, the Middle East, Europe and Latin America, with China, Philippines, the UK, Mexico and Australia being among its top markets.

About 60% of its US$1.9-billion revenue was generated from Asia, 30% from Europe and 10% from others. Pfizer Nutrition is ranked number five in terms of market share in the Chinese baby food market, while Mead Johnson is ranked at number one.

The potential acquirer would get Pfizer's baby-formula brands, including SMA Gold and Promil Gold.

Mengniu Dairy, which is about 28% held by units of state giant COFCO, has products that include liquid milk products, ice cream, and milk powder. Milk powder contributed less than 1% of the company's revenue in 2010, according to sources.

It was among those named for having milk powder samples which tested positive for melamine in 2008.