Nestlé’s $11.85bn (€9bn) acquisition of Pfizer Nutrition has been blocked by Mexican competition officials over concerns that the deal could lead to price increases.
The Mexican Federal Competition Commission (CFC) announced yesterday that it would not authorise Nestlé’s acquisition of Pfizer’s nutrition business as it would give the Switzerland-based food and beverage giant too high a share of the domestic infant formula market.
According to the Mexico City-based authority, the transaction would allow Nestlé's share of the stage one and two infant formula market would increase to nearly 70.6%, and its share of the stage three market to 88.2%.
This, according to the CFC, would leave the door wide open for Nestlé to increase unit prices by up to 11.5%.
Through the deal, which was agreed in April 2012, Nestlé hopes to expand its already bulging infant formula portfolio with the addition of Pfizer-owned brands such as S-26 Gold, SMA, and Promil.
DairyReporter.com approached Switzerland-based Nestlé for comment relating to the CFC decision, but not reply was forthcoming before publication.
‘Harmful effect’ on competition
“The Plenum of the Federal Competition Commission (CFC) decided not to authorise the acquisition of the Pfizer Inc’s nutrition business in Mexico by Nestlé SA, considering that the notified transaction imposes a real and substantial risk to competition and free competition,” said a translated statement from the CFC on their decision.
“Nestlé and Pfizer submitted a proposal of conditions that proved insufficient to prevent harmful effects on competition arising from the notified acquisition.”
“In these circumstances, the CFC analysis showed that, if carried out, the operation would allow Nestlé to increase standard infant formula prices by between 2.9 and 11.5%, depending on the brand,” the statement added.
Nestlé and Pfizer Nutrition have 30 days to lodge an appeal with the CFC.
Earlier this month, the Chinese Ministry of Commerce (MOFCOM) approved the proposed acquisition – following the footsteps of the Brazilian Council for Economic Defence (CADE) and the Competition Commission of India (CCI), who approved the deal earlier this year.
Analysts have previously warned that Nestlé may be forced to carve up Pfizer Nutrition to meet competition authority demands.
More to follow……