Mead Johnson dismisses Nestle takeover rumors

The world's largest standalone manufacturer of baby formula, Mead Johnson Nutrition Co, has dismissed as "pure speculation" industry talk that it's become an acquisition target of Nestle AG. Stephen W. Golsby, president and CEO of the US-based company, said on Wednesday that Mead Johnson's position as a globally successful dairy powder brand means merger and acquisition rumors are constantly active. "None of them is true," said Golsby, adding that Mead Johnson is focusing on its core business infant and child nutrition - and is growing rapidly worldwide, but especially in China. Speaking after the Swiss franc hit a record high in August, James Singh, the chief financial officer of Switzerland-based Nestle, said the world's largest food company by sales may pursue acquisitions. Roland Decorvet, chairman and CEO of Nestle Greater China, reaffirmed that statement in Beijing last month. Buying Mead Johnson would help Nestle occupy about half of the market for baby formula, and achieve the number one slot in China, according to the market researcher Euromonitor International Inc. A July report from the China Nation Commercial Information Center showed that Mead Johnson led in China with 12.06 percent of the market, while Nestle was second with 10.58 percent and Abbott Laboratories Ltd had 7.29 percent. Further down the list, Dumex, part of Groupe Danone SA, had 6.72 percent and Pfizer Inc's Wyeth unit trailed with 4.72 percent. "As an independent public company, we will continue our investment in China," said Golsby. Mead Johnson officially opened its pediatric nutrition research institute, with investment of more than 100 million yuan ($15.63 million), in Guangzhou on Wednesday. It's the third such facility for the company, following earlier centers in the US and Mexico. The total amount invested in the three institutes exceeds $40 million. Golsby said both the new facility in Guangzhou and a related pilot plant will concentrate on studying the condition of Chinese babies and cooperating with local medical and nutrition institutes to develop locally tailored products. In addition to research and development, the company will also continue the expansion of its manufacturing capability in China to meet ever-increasing demand, although Golsby declined to reveal the exact cost of the strategy. So far, Mead Johnson's sales network covers 250 cities across China, with 50 added this year, and a further 50 to be added next year. Nestle's sales in China increased nearly 15 percent to reach 20.4 billion yuan in 2010, accounting for 2.55 percent of its global business. The Swiss company is experienced at buybacks and acquisitions, said Chen Lianfang, an analyst from Beijing Orient Agribusiness Consultant Ltd, who cited purchases of stakes in the Guangdong-based Hsu Fu Chi International Ltd and Xiamen Yinlu Food Group Co Ltd as examples. "Mead Johnson's market share in both the US and China would be really lucrative for Nestle," she said.