Nestlé and GSK among potential bidders for Pfizer's consumer health unit, after J&J pulls out of race

Johnson & Johnson was considered one of the strongest contenders as the US healthcare giant seeks to expands its portfolio. It initially worked with Goldman Sachs on a possible bid but subsequently decided to pull out, the news agency's sources say.

“While we would normally not comment on market speculation or rumors, in this instance we refute assertions that we are in negotiation for Pfizer’s consumer business,” J&J’s vice president of media relations Ernie Knewitz told Reuters and FiercePharma. The deal could be a "game-changer" for rival drugmaker GSK or consumer goods group Reckitt by making them one of the biggest global players in consumer health, an increasingly lucrative sector as aging populations and health-conscious consumers drive demand for self-medication.

Nestlé is reportedly among the companies considering to make a bid. CEO Mark Shneider is a healthcare veteran and is seeking to deepen the company's focus on nutrition, health and wellness.

Last week, NutritionInsight’s sister website, FoodIngredientsFirst reported that Nestlé is offloading its US confectionery business to the Ferrero Group in an estimated US$2.8 billion deal that bolsters the Italian company’s footprint in the US market. The deal allows Nestlé to concentrate on a range of growth categories including bottled water, coffee, frozen meals and infant nutrition. It is now seeking to buy Merck KGaA’s consumer health unit, sources have previously told Reuters, as part of its healthcare drive.

In December, Nestlé agreed to acquire Canadian nutritional health products manufacturer Atrium Innovations, again supporting Nestlé’s pursuit of growth opportunities in consumer healthcare to complement the company's focus on its high-growth food and beverage categories.

Although Pfizer’s Centrum vitamin and Caltrate calcium supplements arguably fit with Nestlé’s new strategic direction, other aspects – such as Pfizer’s Advil painkillers – are far removed from the Swiss consumer food giant's core businesses like coffee, chocolate and baby food, the sources said.

Two of the sources said Pfizer valued the asset at more than 20 times its core earnings, or US$20 billion. Pfizer sold its previous consumer healthcare business to J&J in 2006 for US$16.6 billion and the US group, with interests from baby powder to cancer drugs, had been seen as a logical buyer for the current assets.

Yet it could have faced possible antitrust problems if it beefs up its presence in the sector, said one of the sources who is familiar with the company.

A sale would confirm the currently fragmented consumer health sector as fertile ground for deal-making following a spate of transactions in recent years. Pfizer has declined to comment on the sale process, saying only that any decision on the future of the unit would be made in 2018.

“Although there is a strong connection between our Consumer Healthcare and elements of our core biopharmaceutical portfolio, it is also distinct enough from our core business that there's a potential for its value to be more fully realized outside the company. We anticipate there will be broad interest from potential acquirers and we expect to make a decision in 2018,” Pfizer CEO Ian Read said on Oct. 31 during a Pfizer earnings call with Reuters.

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