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Nestlé drops Givaudan from balance sheet

Givaudan is no longer the flavour of the month at Nestlé Keystone

Nestlé has announced it is selling its 10% stake in Swiss fragrance and flavour maker Givaudan in an effort to narrow its focus on core operations and clean up its balance sheet.

The Swiss multinational’s entire stake is valued at as much as CHF1.08 billion ($1.20 billion). “I think the cash will be used for bolt-on deals and may help to enable a small buyback potentially within the next 18 months,” Jon Cox, an analyst at Kepler Cheuvreux, told the Reuters news agency.

The maker of KitKat chocolate bars and Nescafe coffee acquired its stake in Givaudan, one of its suppliers, 11 years ago when it sold the fragrance and flavour maker its food ingredient company FIS for a combination of cash and stock worth CHF750 million.

The move was also aimed at helping prevent Givaudan from being taken over. Its shares have risen 153% since the FIS sale was announced in January 2002.

“Nestlé has been very satisfied with its holding but believes now is the appropriate time to divest,” the Swiss group said in a statement on Friday.

Nestlé, whose annual growth rate has been slowing, has been looking to offload businesses it considers to be underperforming and is currently reviewing its various units.

Last month, Nestlé sold the bulk of its Jenny Craig weight-loss business to a US private equity firm for an undisclosed sum, but believed to be less than the $600 million it paid in 2006.

It is now looking for a buyer for its PowerBar energy bars, according to people familiar with the matter.

There has also been market speculation that Nestle might part with its 29.5% stake in French cosmetics group L’Oreal when restrictions on selling it end in April 2014.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR