By H Miller and E Schaper/Bloomberg
Geneva: Nestle SA, the world’s largest food company, agreed to buy the Gerber baby-food brand from Swiss drugmaker Novartis AG for $5.5 billion (Rs23,577 crore) in cash to gain almost four-fifths of the U.S. market for infant purees.
Nestle will add Gerber’s annual sales of $1.6 billion to its nutrition unit, which includes the Jenny Craig diet business, the Vevey, Switzerland-based company said in an e- mailed statement on 12 April.
The maker of Neslac and Good Start infant formulas spent almost $4 billion last year buying nutrition brands with sales growth surpassing the rest of the food industry, including Jenny Craig and a Novartis unit that makes enriched meals for the sick.
“For Nestle it’s a positive step,” said Tilo Wannow, an analyst at BHF-Bank AG in Frankfurt. “They are strengthening their core competence, and $5.5 billion is not a lot of money.”
The brand, featuring the cherubic Gerber baby on its labels, is sold in 80 countries and had operating profit of $307 million last year. Its headquarters are in Parsippany, New Jersey. Daniel Gerber founded the business in the U.S. in 1928, mass-producing strained fruit for infants at a cannery.
The deal will close in the second half and is subject to regulatory approval, the companies said.
“This transaction is the right move for Gerber, as it will become a priority business in a leading global nutrition company,” Novartis chief executive officer Daniel Vasella said in a statement sent by the Basel, Switzerland-based drugmaker.
Novartis is now left with contact-lens maker Ciba Vision as its only division is not making drugs or vaccines after shedding non-healthcare units for a decade. Before selling its hospital- food unit for $2.5 billion to Nestle in December, Novartis sold a division that makes Isostar energy drinks to ABN Amro Holding NV for $271 million.
“The divestiture period is over,” Novartis spokesman John Gilardi said on 12 April. “Our portfolio is now well focused on strategic healthcare needs.” He also said Ciba is not considered a “core business” for Novartis.
The sale price of $5.5 billion is “reasonable,” said Karl-Heinz Scheunemann, an analyst at Bankhaus Metzler in Frankfurt.
“Nestle has always looked at Gerber with a degree of admiration and interest,” spokesman Francois Perroud said. He declined to confirm past speculation, reported by the Wall Street Journal in 2004, that the Swiss company tried to buy Gerber before it was sold to Novartis predecessor Sandoz AG in 1994 for $3.7 billion.
Buying Gerber will give Nestle 79% of the U.S. baby-food market, according to Morgan Stanley. Gerber “is the perfect complementary fit,” Nestle chief executive officer Peter Brabeck said. “This is a major step in the transformational journey of Nestle toward a nutrition, health and wellness company.”
To help finance expansion in healthier food, Nestle has sold more than $1 billion of divisions that process coffee and cocoa and make ingredients. In June, Nestle agreed to buy Jenny Craig, a U.S. provider of slimming programs and diet food, for $600 million, and paid $673 million in May for Uncle Toby’s cereals and fruit snack bars.