ACCC to not oppose acquisition by Nestle(C) of Pfizer Nutrition
Nov 22, 2012 (Menafn - M2 PRESSWIRE via COMTEX) --The Australian Competition and Consumer Commission today announced that it would not oppose the proposed acquisition of Pfizer Nutrition, a global infant nutrition business, from Pfizer Inc by Nestle S.A after accepting a court enforceable undertaking.
The undertaking requires Nestle to license Pfizer Nutrition's Australian infant nutrition business' brand portfolio to an independent purchaser to be approved by the ACCC.
Nestle and Pfizer Nutrition are two of the three largest suppliers of infant formula and toddler milk in Australia. Nestle supplies infant formula and toddler milk in Australia under the brands NAN and Lactogen. Pfizer Nutrition supplies infant formula and toddler milk under the brands S-26 and SMA.
The ACCC undertook extensive consultation on the proposed acquisition with a strong focus on the extent to which the removal of Pfizer Nutrition, one of Nestle's closest competitors in the supply of infant formula and toddler milk, would reduce competition relative to the present market structure.
"The ACCC had significant concerns that without the undertaking, the proposed acquisition would further increase concentration in already concentrated markets, where barriers to entry and expansion are high," ACCC Chairman Rod Sims said.
"If the proposed acquisition were to proceed in Australia, the number of major suppliers of infant formula and toddler milk in each of the distribution channels would be reduced from three to two, and our inquiries indicated that this would be likely to substantially lessen competition in the supply of infant formula and toddler milk."
The court enforceable undertaking provided by Nestle is aimed at ensuring that the current level of competition in the relevant markets will be maintained through the creation of a strong third major supplier of infant formula and toddler milk in Australia. It requires Nestle to sell an exclusive ten year licence for Pfizer Nutrition's infant nutrition S-26/SMA brand portfolio in Australia, followed by a further ten year 'black out' period in which Nestle would not be permitted to re-enter the markets with Pfizer's brands.
The undertaking also seeks to ensure that the approved purchaser has the necessary assets (including intellectual property), rights and agreements to allow it to operate the divestiture business as a viable going concern to compete effectively in the relevant markets.
"In the specific circumstances of this transaction, the ACCC decided that a permanent divesture of the brands would not be required and that the licence and re-branding remedy proposed by Nestle appropriately addresses the primary competition concerns and is likely to create an effective, independent and long-term competitor to the merged entity," Mr Sims said.
The ACCC is aware of a number of potential purchasers of the divestiture business which have proven expertise in the manufacture and supply of infant formula and toddler milks. The undertaking is designed to provide the means for an approved purchaser to successfully transition and re-brand the S-26/SMA brand portfolio to their own proprietary brand over a number of years and also have the opportunity to build brand equity of the re-branded products during the 'black out' period.
Pfizer Australia Pty Ltd has also provided a court enforceable undertaking to the ACCC to provide transitional services and transfer key employees to the approved purchaser of the divestiture business.
The undertakings will be available on the ACCC's website. A Public Competition Assessment will be issued by the ACCC in due course.
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