Nestle to Buy Gerber for $5.5 Billion
By
ELIANE ENGELER
GENEVA (AP) - Nestle
SA, the world's biggest food and drink
company, said Thursday it will buy Gerber
Products Co. from pharmaceutical maker
Novartis SA for $5.5 billion, giving it
the largest share of the global baby food
market.
|
(AP)
Nestle's headquarters are pictured
in Vevey, Switzerland, February
27, 2003. Nestle SA said... |
The
acquisition helps further Nestle's recent
focus on health and nutrition, following
its purchases of the U.S. weight control
company Jenny Craig and Novartis Medical
Nutrition.
Nestle,
which owns brands such as Nescafe, Perrier
and Dreyer's, is also the world's largest
manufacturer of infant nutritional products
- largely through its leading positions
in developing countries such as Brazil
and China - but had no presence in baby
food in the United States.
Gerber,
which Nestle has coveted for more than
a decade, dominates the U.S. baby-food
market, with a 79 percent share, according
to Morgan Stanley. (MS)
"The
acquisition of Gerber is the perfect complementary
fit," said Nestle Chairman and CEO
Peter Brabeck-Letmathe. "It not only
gives Nestle the leadership position in
baby food, but it also constitutes a decisive
step to establish Nestle Nutrition as
the undisputed global leader in the nutrition
field."
Adding
Gerber will help the company's nutrition
business generate annual sales of close
to $8.2 billion. The company said it expects
Gerber to generate sales of around $1.95
billion this year.
Nestle
shares fell 0.7 percent to 406.05 Swiss
francs in Zurich, where Novartis shares
were up at 67.35 francs ($55.27).
Nestle
first tried to acquire Gerber in 1994,
but lost to Sandoz AG, which later merged
with Ciba-Geigy to form Novartis. Since
then, Novartis has taken steps to broaden
Gerber's business beyond jarred foods.
In
2000, Gerber began selling a line of powders,
oils and other toiletries for children,
and in 2002 it launched microwavable meals
for older toddlers. It also has a life-insurance
unit. But the baby-food business has never
been a good fit for a parent company that
mainly sells medications.
Novartis,
based in Basel, has shed several noncore
businesses in recent years. In December,
Novartis sold its medical-nutrition division
to Nestle for $2.5 billion. Novartis is
focusing on three main areas: inventing
new prescription medicines, vaccines,
and selling low-cost generic drugs and
over-the-counter medicines.
"This
transaction is also the right move for
Gerber, as it will become a priority business
in a leading global nutrition company,"
Novartis Chairman and CEO Daniel Vasella
said in a statement.
Analysts
said although the price appeared high
at first sight, it was in line with similar
deals.
"Added
to Nestle's existing baby food business
in the U.S. and its overall North American
business, this makes Nestle a very clear
leader in infant nutrition in the U.S.,
where, unlike Western Europe, having babies
remains in vogue," said Rob Mann,
a Collins Stewart food analyst in London.
The
purchase is expected to be completed during
the second half of this year, subject
to approval by regulatory authorities,
Nestle said.