27 April 2012
David Carpenter, 49, an M&A partner in Mayer Brown's New York office who also co-chairs the firm's India practice.
Nestlé, the world's largest packaged-foods company.
Nestlé, based in Vevey, Switzerland, said Monday that it will purchase pharmaceutical giant Pfizer Inc.'s infant nutrition business for $11.9 billion.
Nestlé will pay $11.9 billion in cash to acquire a business that will take in an estimated $2.5 billion in revenue this year, 85 percent of that sum coming from emerging markets. The Pfizer unit, which the company acquired as part of its 2009 takeover of Wyeth, includes operations in the Asia-Pacific region and the Middle East, and features such infant formula brands as S-26 Gold, SMA, and Promil.
The deal is expected to close in the first half of 2013, pending regulatory approval.
THE BIG PICTURE
Nestlé expects the acquisition to improve its foothold in China and other emerging markets. The company plans to integrate the Pfizer brands into its existing infant nutrition portfolio‚ which includes such popular names as Gerber and Nan.
The Swiss company wound up paying a hefty price paid for a unit many expected to sell for less than $10 billion, according to The Wall Street Journal. In bidding on a business it sees as offering strong growth opportunities, though, Nestlé faced stiff competition from French dairy giant Danone, the WSJ notes. In announcing the acquisition, Nestlé also highlighted its belief that the deal will eventually result in annual cost savings of roughly $160 million.
There has been speculation that parts of the Pfizer unit could immediately find their way back to the auction block. Nestlé must win regulatory approval for the deal in multiple countries where it now has potentially overlapping baby food businesses, according to Bloomberg. The publication, citing unnamed sources, reported that as much as 15 percent of the newly acquired unit—including divisions in Mexico, Australia, Venezuela, and Thailand—could be put up for sale in an effort to mollify foreign regulators.
Lawyers in Mayer Brown's tax controversy practice have represented Nestlé for nearly 25 years, and over time the firm has taken the lead on several major acquisitions, Carpenter says. His own work with the client began in 1996, when he advised on the dissolution of a nutrition joint venture with Baxter.
Since then‚ save for a three-year stint as general counsel of scrap metal recycler Metal Management‚ Carpenter estimates that he has worked on at least a dozen deals for Nestlé. "When I came back to the firm in 2001, you know, I tried to pick up where I left off and went and visited the [Nestlé] folks that I knew in Switzerland," he says.
Carpenter has advised on such major Nestlé deals as the company's purchase of Hot Pocket maker Chef America Inc. for $2.6 billion in 2002 and the acquisition of Gerber from Novartis for $5.5 billion in 2007. Over the years, Nestlé has attempted to expand its health and nutrition offerings through such acquisitions as the 2006 purchase of Novartis Medical Nutrition for $2.5 billion and a $600 million deal for Jenny Craig the same year. Last year Carpenter led the way on Nestlé's $1.1 billion acquisition of diagnostic company Prometheus Laboratories Inc.
"A lot of these transactions that we did for Nestlé [were] as Nestlé was sort of transforming itself from a plain food company to a health and wellness company," Carpenter says.
The firm's work for Nestlé has also transformed over the years. After adding M&A duties to its tax controversy efforts, Mayer Brown added some litigation duties to that list last year when it welcomed a group of former Howrey IP, antitrust, and litigation attorneys, some of whom had a previous relationship with Nestlé. In fact, Carpenter says, the additions helped Mayer Brown score "a real coup" in landing the global antitrust effort for Nestlé in this week's Pfizer deal, and assignment that would have gone to Howrey in the past.
Carpenter says he barely had a chance to celebrate the fruits of his labor on last year's Prometheus deal before Nestlé set its sights on Pfizer's infant nutrition business. In September, he was at a dinner in Switzerland marking the closing of the Prometheus transaction when Nestlé's in-house lawyers first mentioned the company's next target.
"It took some time for Pfizer to organize the process," Carpenter says, adding that significant work did not begin until the beginning of the year. "So, the intense part of the deal has really been in 2012."
Carpenter adds that while he and his team never knew for sure that Nestlé was competing against Danone to acquire the target business, they had the sense they were not representing the lone suitor. "And, whenever that's the case, it makes for a fairly intense and strategic process," he says.
Once the deal work kicked off in earnest, Carpenter says he set about assembling a global team of Mayer Brown attorneys led by partners in New York, Chicago, and Hong Kong. The team's global reach was necessary considering the international assets involved in the acquisition. Carpenter's management of the deal team also included a collaboration with U.K. firm Linklaters, which he says worked on due diligence matters in Europe, the Middle East, Africa, and some parts of Asia.
"The way we tried to run this deal was to treat Linklaters the same way that I would have treated my Beijing office or Hong Kong office," Carpenter says. "We really did have a very strong collaboration with Linklaters in terms of putting the client first and not trying to outmuscle each other."
Reprinted with permission from the April 27, 2012 edition of The American Lawyer © 2012 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.