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Australia Won't Oppose Nestle Buy of Pfizer Unit, Adds Condition

Date : 11/22/2012 @ 9:17AM
Source : Dow Jones News

Australia Won't Oppose Nestle Buy of Pfizer Unit, Adds Condition

   By Robb M. Stewart 

MELBOURNE--Australia's antitrust regulator has attached a condition to its approval of Nestle SA's (NESN.VX) proposed US$11.9 billion acquisition of Pfizer Inc.'s (PFE) infant nutrition business, requiring it to license the brand portfolio in Australia to an approved independent purchaser.

The Australian Competition and Consumer Commission in a statement Thursday said it wouldn't oppose the deal after accepting an enforceable undertaking from the companies.

Nestle and Pfizer Australia are two of the three largest suppliers of infant formula and toddler milk in Australia and the commission said it had concerns the planned takeover would increase concentration in the market where barriers to entry and expansion are high.

"Our inquiries indicated that this would be likely to substantially lessen competition" without the undertaking to license Pfizer's Australian infant nutrition brands, said Rod Sims, chairman of the ACCC.

Mr. Sims said the undertaking is court enforceable and is aimed at ensuring the current level of competition in the market is maintained through the creation of a third major supplier of formula and toddler milk.

The agreement requires Nestle to sell an exclusive 10-year license for Pfizer's S-26 and SMA brands, followed by a further 10-year "black out" period in which Nestle won't be allowed to re-enter the market with Pfizer's brands.

"The ACCC decided that a permanent divesture of the brands would not be required and that the licence and rebranding 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.

Nestle beat off rivals including Danone SA (BN.FR) to secure a deal for Pfizer's business in April, although approval from anti trust bodies in several countries is necessary. The Chinese Ministry of Commerce early this month approved the acquisition, while Mexico's Federal Competition Commission this week said it had voted to reject the deal and had given the companies 30 working days to appeal.

Write to Robb M. Stewart at robb.stewart@wsj.com

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