Nestlé challenges world leader in pet food production

More of the world's pets will be eating Nestlé's food Keystone

The Swiss-based food group, Nestlé, has confirmed that it is bidding for the United States pet food company, Ralston Purina, in a deal worth almost SFr17 billion ($10.3 billion).

If the acquisition is successful, it will create a pet-care business able to take on the market leader, Mars.

The deal would give Nestlé a 40 per cent share of pet food sales in the US, making it the market leader. Worldwide, Mars would just hold on to the top spot.

In a statement from its headquarters in Vevey, Nestlé said it was offering $33.50 in cash for each of Ralston Purina’s shares.

Analysts say the pet food business is one of the strongest growing areas. Nestlé has been involved in the industry ever since its 1985 acquisition of Carnation, which brought it the “Friskies” line of products.

It then bought Alpo in 1994, Spillers in 1998 and Cargill Argentina in August 2000 to create a pet-care business with SFr6 billion in sales.

Ralston Purina had North American sales of more than SFr3.67 billion last year and international sales of around SFr735 million.

“This merger is not only in line with the long-term strategic approach of Nestlé but the complementary strengths of Nestlé and Ralston Purina will accelerate both the growth and the performance of the Nestlé group,” said Nestlé chairman Rainer Gut.

Analysts say the deal is unlikely to be derailed by rival bids from Mars or other food companies but it will have to satisfy the concerns of the US regulatory authorities.

They may be worried about the number of brands housed under one roof.

Nestlé is expected to argue that there is little overlap between the two groups since Ralston Purina produces mainly dried food, while Nestlé is more involved in the canned market.

But analysts expect Nestlé to sell off some brands to allay competition worries.

The transaction is expected to be completed by the end of 2001.

swissinfo with agencies