Nestle SA, the world's biggest foodmaker, received European antitrust approval for its US$11.9 billion purchase of Ralston Purina Co after agreeing to give up dog and cat-food brands in three countries.
The purchase, which has yet to be passed by US authorities, would make Nestle the leader of the US$25 billion pet-food industry.
Vevey, Switzerland-based Nestle agreed to sell or license products in Spain, Italy and Greece to allay EU concerns.
"I don't see why they should not get approval in the US," said Stephanie Gerrard, who helps manage ?30 billions (US$43 billion) at Aberdeen Asset Management Plc and holds Nestle shares.
"We're pleased that Europe has been approved."
The purchase would allow Nestle to overtake Mars Inc even after the family-owned maker of Pedigree this month agreed to buy Royal Canin SA of France, Europe's No. 1 maker of dry pet foods, from BNP Paribas for 1.5 billion euros (US$1.3 billion.) Nestle's shares rose SF7, or 1.9 percent, to 369.
Ralston fell US$0.06 to US$31.94.
The EU was originally due to rule July 18 and extended the review by two weeks after Nestle proposed concessions.
"The fact that there was a hiccup reminded investors that it's not a done deal in the US," said Anne Alexandre, an analyst at HSBC who has a "hold" recommendation on Nestle shares. She said she expects the purchase to win US approval on conditions such as the sale of some dry-cat-food brands.
The US likely will give approval with requirements that the companies sell some ``fairly sizable'' businesses, AG Edwards & Sons Inc. analyst Christopher Growe said. He wouldn't speculate what those might be.
"The outlook for the US antitrust review is murky at best," Growe said. He has a "reduce" rating on Ralston's stock.
The package of concessions agreed in Europe "offers a viable solution and is in the interest of consumers," the European Commission said in a statement.
"Nestle welcomes this decision, which confirms the process of completing the merger is well set for a successful conclusion by the end of the year," said spokesman Francois Perroud. He said Nestle he didn't know the value of the concessions.
The Swiss company must now overcome opposition by farmers and consumer groups. They say the acquisition, which would give Nestle 45 percent of the US cat-food market and 40 percent in dog food, will result in higher prices and fewer choices.
The American Antitrust Institute, the National Consumers League and Farmers' organizations have lobbied the US Federal Trade Commission, which isn't expected to rule for several months.
Albert Foer, president of the American Antitrust Institute, said the FTC should consider whether the acquisition would affect what he called "category captaincy."
Retailers, he said, often pick a lead supplier to provide information that helps them decide how to allocate shelf space.
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