DJ Mexico's Antitrust Agency Rejects Nestle Acquisition of Pfizer Arm in Mexico 

DJ Mexico's Antitrust Agency Rejects Nestle Acquisition of Pfizer Arm in Mexico

Nov 20, 2012 (Dow Jones Commodities News via Comtex) --By Anthony Harrup

MEXICO CITY--Mexico's antitrust agency said Tuesday that it has denied clearance to Nestle SA (NESN.VX, NSRGY) to acquire Pfizer Inc.'s (PFE) infant nutrition business in Mexico, as it would give the Switzerland-based food giant too big a share of the domestic market for baby formula, allowing it to raise prices.

The Federal Competition Commission, or CFC, said in a statement that it voted 4-1 to reject the acquisition, and that the companies have 30 working days to appeal.

Nestle outbid Groupe Danone SA in April to buy Pfizer's global infant nutrition business for 11.85 billion.

The CFC determined that the acquisition would give Nestle 71% of the domestic market for stage one and two formula, and 88% of the market for stage three formula.

It would allow Nestle to raise prices of its different brands between 2.9% and 11.5%, also giving competitors room to raise their prices to a lesser extent, the CFC added.

The two companies proposed conditions that could be placed on the acquisition, but the commission said it considered the proposals insufficient to prevent the "real and considerable risks" to competition in that market.

Imports of formula into Mexico are negligible, and the market presents high entry barriers, including economies of scale, a complex system of promotion through contact with pediatricians, and brand loyalty, the CFC said.

Representatives of Nestle in Mexico couldn't immediately be reached to comment.

Write to Anthony Harrup at anthony.harrup@dowjones.com

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11-20-12 1054ET

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