Business

Nestle buying Gerber baby food maker for $5.5B US

Nestle SA announced Thursday that it will buy baby-food maker Gerber Products Co. from pharmaceutical giant Novartis for $5.5 billion US, pushing it to No. 1 in the world's baby food market.

Nestle SA announced Thursday that it will buy baby-food maker Gerber Products Co. from pharmaceutical giant Novartis for $5.5 billion US,pushing it to No. 1 in the world's baby food market.

The deal is expected to be completed during the second half of 2007, subject to approval by regulatory authorities, said Nestle, the world's biggest food and drink company.

Gerber dominates the baby-food market in the United States, with a 79 per cent share, according to Morgan Stanley.

Nestle is 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.

The company said it expects Gerber to generate sales of about $1.95 billion US this year.

The acquisition of Gerber, which follows Nestle's purchases of the U.S. health care and weight control company Jenny Craig and Novartis Medical Nutrition, will help the company's nutrition business to generate sales of close to $8.2 billion US.

"The acquisition of Gerber is the perfect complementary fit," said Peter Brabeck-Letmathe, Nestle chairman and chief executive officer. "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."

Nestle has coveted Gerber for more than a decade. It first tried to acquire the unit 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 microwaveable 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, Switzerland, has shed several non-core businesses in recent years. In December, Novartis sold its medical-nutrition division to Nestle for $2.5 billion US. 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.

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