Swiss food giant Nestlé is reported to have shown an interest in buying the Medical Nutrition unit of France’s Danone. Nestlé is among four groups that have shown an interest in acquiring the business, along with diversified German healthcare group Fresenius, according to the daily publication, Les Echos.
Reuters reported last month that Danone, the world's biggest yoghurt maker, was considering selling the unit - a maker of feeding tubes and food for the sick, young and elderly - which has been under pressure from declining healthcare budgets in Europe.
Reports have said that along with Danone and Fresenius, other candidates that are in the running for the business are Nordic investment fund EQT and a fourth unnamed company, according to Les Echos. Spokesmen for Nestlé and Fresenius declined to comment on the report while Danone could not be immediately reached for comment.
A sale of its medical nutrition operations would make sense for Danone as it has never been a core part of its business. The French dairy group would then be able to use the cash from the sale to focus on general consumer products and expansion of its dairy and baby food businesses in higher-growth emerging markets.
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.
Recently Danone has faced challenges across Europe as consumers have been seeking out cheaper brands. Meanwhile in China Danone is working to convince Chinese parents to trust its baby-formula brands, after a food safety warning in the country from Fonterra, which led to the recall of huge amounts of formula across a number of Asian countries.
As well as Nestlé, 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.
