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Reports: Novartis, Bayer Vying For Pfizer's Animal Health Business

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Healthcare giant Pfizer, Inc.'s (PFE) is said to have spurned a $16 billion acquisition offer for its animal health business from Swiss drug company Novartis AG (NVS: Quote) on Wednesday. Pfizer deemed the offer as too low as the business is valued at nearly $20 billion.

German drug giant Bayer AG (BAYRY.PK) is also reportedly in talks with its bankers to raise funds to make a bid for the business. Earlier, Bayer had unsuccessfully bid for the Intervet business of Schering-Plough Corp., which is currently a part of another drug giant Merck & Co., Inc. (MRK). The competition could see Novartis sweeten its offer, but it is unclear if it would do so.

Bayer is currently in the initial thinking stages to float an offer for the business, but Novartis has already made its preliminary offer that was rejected by Pfizer. Both Bayer and Novartis are currently in the process of strengthening and supplementing their existing animal health lines.

However, Pfizer could currently be more in favor of spinning-off the animal health business to shareholders in order to avoid a huge tax bill and face antitrust complications. A spin off to shareholders would be structured as a tax-free transaction.

Pfizer's Madison, New Jersey-based animal health business makes vaccines for livestock and household pets. The business is the largest in the industry and generated revenues of $4.18 billion in fiscal 2011. It strives to provide full animal health solutions to veterinarians, livestock producers, and companion animal owners.

New York-based Pfizer has been in the process of exploring strategic alternatives for its animal health business, along with its infant nutrition business, in order to focus on its core biopharmaceutical products. It announced the ongoing process in early July 2011 and was considering options including, among others, a full or partial spin-off the businesses, sale or other transactions.

Ian Read, president and chief executive officer of Pfizer, said at that time, "Both Animal Health and Nutrition are strong businesses with attractive customer bases and solid fundamentals, but distinct enough from our core businesses that their value may be best maximized outside the company."

Pfizer also engaged J.P. Morgan at that time in connection with the evaluation of strategic alternatives for its animal health business. Pfizer had said that it expects to complete any transactions that may result from these evaluations in 12 to up to 24 months.

Meanwhile, Pfizer is in the final stages on a possible sale of its infant nutrition business that could be worth about $10 billion. The first round of bids saw Swiss baby food company Nestle SA (NSRGY.PK) and French food processor Danone SA (DANOY.PK) emerging as as the frontrunner's to acquire the business. Mead Johnson Nutrition Co. is a joint bidder along with Danone. A deal is expected to be finalized by the end of the month.

Pfizer could still look to spin-off the businesses into its own separate company, if it fails to fetch the price it's seeking for the units. The company said recently that it continues to expect that any separation of these businesses from Pfizer to occur between July 2012 and July 2013. It has been reviewing the businesses since February 2011 as it was looking to shed some of its non-core assets since it completed the $68 billion takeover of Wyeth in October 2009.

PFE closed Wednesday's regular trading session at $21.37, up $0.11 or 0.49% on a volume of 32.83 million shares.

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by RTT Staff Writer

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