Home / World Business
Fri, Apr 13, 2007 - Page 10 News List

Nestle to purchase Gerber from Swiss drugmaker Novartis

FOCUSED After the sale, Novartis will be left with contact-lens maker Ciba Vision as its only business not related to producing medicines and vaccines

BLOOMBERG

Nestle SA, the world's largest food company, agreed to buy baby food brand Gerber from Swiss drugmaker Novartis AG for US$5.5 billion in cash to gain almost four-fifths of the US market for infant purees.

Nestle will add Gerber's annual sales of US$1.6 billion to its nutrition unit, which makes Jenny Craig diet food, the Vevey, Switzerland-based company said in a statement yesterday.

The maker of Neslac and Good Start infant formulas spent almost US$4 billion last year buying nutrition brands with sales growth surpassing the rest of the food industry, including a Novartis unit that makes enriched meals for the sick.

"This is a reasonable price," said Karl-Heinz Scheunemann, an analyst at Bankhaus Metzler in Frankfurt, Germany.

Gerber was founded in the US in 1928 by Daniel Gerber, who began mass-producing strained fruit for infants at a cannery.

Gerber, known for the baby appearing on its jar labels, is based in Parsippany, New Jersey and "recognized by virtually all mothers in the US," Nestle says.

It sells 190 products in 80 countries, and had an operating profit of US$307 million last year.

"This transaction is the right move for Gerber, as it will become a priority business in a leading global nutrition company," Novartis CEO Daniel Vasella said in a statement sent by the Basel-based drugmaker.

The transaction will close in the second half and is subject to regulatory approval, the companies said.

Novartis is left with contact-lens maker Ciba Vision as the only business not making drugs or vaccines now.

Ciba is not a "core business," Novartis spokesman John Gilardi said yesterday.

Before selling its hospital-food unit for US$2.5 billion to Nestle in December, Novartis sold off a division that makes Isostar energy drinks to ABN Amro Holding NV for US$271 million.

Sales of nutritional foods are increasing by as much as 8 percent each year, compared with between 1 percent and 2 percent for the broader food market, according to European broker Kepler Equities.

Buying Gerber will give Nestle 79 percent of the US baby-food market, according to Morgan Stanley.

Full-year sales of Nestle's nutrition foods, which include PowerBar energy snacks and Clinutren products, rose 6.1 percent at constant currencies to almost 6 billion Swiss francs (US$4.9 billion).

The profit margin is 16.9 percent for the unit, compared with 13.5 percent for the company overall.

The company does not break out its sales for baby food in its statistics.

This story has been viewed 2819 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top