Swiss food group Nestle is to buy U.S. drugmaker Pfizer's nutrition business for $11.85 billion, beating out French rival Danone as both battle to gain preeminence in the lucrative baby food market.

Nestle, the world's biggest packaged food company, was already seen as a favoured bidder due largely to its deep pockets, and is paying for the acquisition in cash.

The Vevey-based firm expects the acquisition will generate sales of $2.4 billion this year and boost margins, thanks to its large exposure to emerging markets, where the population is growing quickly.

"Its strong brands and product portfolio, its talented people dedicated to the success of its business, together with its geographic presence - 85% of its sales are in emerging markets - will complement our existing infant nutrition business perfectly," Nestle Chief Executive Paul Bulcke said on Monday.

Pfizer put its infant nutrition and animal health businesses up for sale last July as it looks to focus on its core pharmaceuticals business.