Insider traders profited from Nestlé pet food deal

Trading in Nestlé shares on Wall Street after the Ralston Purina deal was announced Keystone Archive

Federal regulators in the United States say they intend to bring legal action against share traders for alleged insider dealing over Nestlé's purchase of pet-food company, Ralston Purina.

The Securities and Exchange Commission (SEC) in Washington said it believed traders had profited by using advance knowledge of Nestlé’s plans to purchase Ralston Purina for $10.3 billion (SFr16.89 billion). Nestlé confirmed the deal on Wednesday.

The SEC added that it does not yet know who is involved because insider trading was carried out anonymously through Swiss bank accounts.

The spokesman for the Swiss stock exchange , Leo Hug, said it is unclear whether there had been any insider trading related to the deal in Switzerland.

He added that the exchange had not yet decided whether to open an investigation.

At Nestlé headquarters in Vevey, spokesman François-Xavier Perroud said the company had no comment for the time being.

The SEC wants the courts to levy fines against the defendants, and to make them repay the profits they made.

A lawyer for the SEC, Lawrence West, said the potential profits from selling the options could exceed $300,000.

In a complaint, SEC attorneys argued that the defendants had already made “substantial windfall profits” from their illegal trading and, unless enjoined, would be able to continue to do so.

The trades were made on the Chicago Board Options Exchange through accounts made by a Swiss bank at brokerages Salomon Smith Barney and Carr Futures.

The planned acquisition of Ralston Purina by Nestlé would create a pet food empire that dominates both the US cat and dog food market, with brands such as Alpo, Purina, Friskies and Meow Mix.

swissinfo with agencies