China Mengniu Dairy Co may bid for Pfizer unit

BEIJING: China Mengniu Dairy Co, the nation's biggest dairy company, may bid for Pfizer's infant-nutrition business, two people with knowledge of the matter said.

Mengniu's consideration of a potential bid is at an early stage, the people said, asking not to be identified because the information is private. The company won't decide whether to proceed until more financial data on the unit is available, one of the people said. Mengniu said in a stock-exchange filing today that it isn't "in any direct negotiation" with Pfizer.

The infant-nutrition business may fetch as much as $10.5 billion, and draw interest from companies including Danone, Abbott Laboratories and Nestle, people familiar with the transaction said in July. Mengniu's market value is just over half that amount, and shares in the cheese and milk producer fell on Monday after its interest was reported.

"The deal size for the whole global division is really a bit big," said Jacqueline Ko, an analyst with Kim Eng Securities. "I wonder if they can just buy the China part of the business."

Trupti Wagh, a Pfizer spokeswoman in Singapore declined to comment on market speculation. Mengniu said it will "closely monitor" developments related to a bid for the Pfizer unit. "The company is not in any direct negotiation with Pfizer, and currently has no concrete arrangement or plan in connection with the bid," the Chinese milk producer said in its statement. Mengniu's products include liquid milk products, ice cream, and milk powder. Milk powder contributed less than 1% of the company's revenue in 2010.

The company's largest shareholder is a unit of Cofco Ltd., a state-backed grains trader which said on October 20 that it is seeking overseas acquisitions to help secure food supplies for China. Through a special purpose vehicle, Cofco and Hopu Investment Management Co. own 20% of Mengniu.

Mengniu fell 1.7% to HK$25.75 at the 4 pm. close of trading in Hong Kong. Its market value is about HK$45 billion ($5.8 billion), and the company had about $1 billion in cash and short-term securities at the end of June.