Danone Medical Takeover: Two Bidders Left, Reports Say

07 Apr 2014 --- Just two out of four bidders remain in the running for Danone’s Medical Nutrition business, according to reports. Swiss good company Nestlé and German healthcare group Fresenius are both keen to take on the business, which has been valued at 4 billion euros.

Last month four groups had shown an interest in buying the business, according to the French daily publication, Les Echos. These four groups included Nestlé and Fresenius, but the other two groups have now dropped out of the running. Takeover talks are soon to reach a decisive phase, according to reports.

In February this year it was announced that dairy specialist Danone was considering selling its medical nutrition arm, which makes food and beverages for people with special nutritional needs. The company is expected to focus on the expansion of other areas of its business, such as dairy and baby food.

Analyst Torsten Stocker, who works for AT Kearney in Hong Kong, confirmed last month that challenges in Asia, following the recent baby formula scandal in China, is likely to be one of the drivers for Danone’s sale of its medical nutrition arm. Speaking to Food Ingredients First he said: “While medical nutrition has good structural growth drivers (e.g. aging population), it is a relatively small part of Danone’s portfolio and sold through different channels than most of its other products. Any proceeds could be invested in other parts of that portfolio.”

Danone, which has key dairy brands such as Activia and Actimel as well as water brands, Evian and Volvic, expanded into medical nutrition in 2007 when it bought the Dutch maker of baby and medical foods, Numico. The business included brands such as Fortimel, which is fed via feeding tubes in hospitals, and it also had infant formula for malnourished infants, as well as foods for people suffering from allergies. Danone has never sought to aggressively expand this business since the acquisition and medical nutrition is reported to account for only 6% of its overall sales – although it does generate high margins for the company, and it has experienced strong growth in recent years.

Nestlé is believed to be a strong contender for this business as the company has been investing in health-science nutrition. Recent acquisitions in this field have included a $2.5m deal to buy Novartis Medical Nutrition in 2007, as well as the acquisition last year of Pamlab, which is a US maker of medical foods used to combat depression. Another recent move by Nestlé has been to establish Nestlé Skin Health SA, following the purchase of L’Oreal’s 50% stake in their joint venture Galderma.

The German healthcare group, Fresenius is another strong contender for the Danone medical nutrition unit. Last month Reuters reported that Fresenius was considering making a bid of up to 4 billion euros for the business, which would complement Fresenius’s Kabi unit. The latter makes tube feeding and intravenous feeding equipment and products as well as generic infusion drugs. Fresenius is now Germany’s largest private-sector hospitals operator, having recently acquired most of Rhoen-Klinikum’s hospitals for 3.07 euros.

By Sonya Hook