Food giant Nestle yesterday announced it was buying Kraft Foods’ frozen pizza units in the US and Canada for US$3.7 billion.
“This frozen pizza business greatly enhances Nestle’s frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery,” Nestle chief Paul Bulke said. “With total sales of around 3 billion [Swiss francs], Nestle will become the world leader in the attractive, fast-growing frozen pizza category,” he said.
A Nestle statement said the US is the biggest pizza market in the world with consumer sales of about US$37 billion. It said with estimated sales of US$2.1 billion last year, Kraft Foods was the leader in the frozen pizza category and had enjoyed double-digit growth in the US and Canada over the last four years. The brands include DiGiorno, Tombstone and California Pizza Kitchen.
“Selling this business now not only delivers an attractive return for our shareholders, but enables us to better focus our resources on priority global brands and categories,” Kraft chief executive officer Irene Rosenfeld said. “Nestle is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods.”
Separately, Nestle said it had no intention to bid for the UK’s Cadbury PLC, ending speculation about one potential suitor for the British confectioner.
Kraft said it would use the full net proceeds of the US$3.7 billion pizza business sale to fund a partial cash alternative to Cadbury shareholders.
It said it would give detailed terms of the alternative by Jan. 19, the last day Kraft is allowed to amend its offer under a UK Takeover Panel ruling.
“Kraft Foods is doing this because of the desire expressed by some Cadbury security holders to have a greater proportion of the offer in cash,” Kraft said in a statement.
Kraft said some of its shareholders had asked it be “more sparing in its use of undervalued Kraft Foods shares” in its bid.
Cadbury has rejected Kraft’s offer as derisory, while investors in the company have said Kraft would need to substantially raise the bid to attract their interest.
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