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Nestlé makes its move for Gerber

The acquisition is due to be completed later this year

Nestlé, the world's largest food company, has confirmed it will buy the Gerber baby food brand from Swiss pharma company Novartis for $5.5 billion (SFr6.7 billion).

This content was published on April 12, 2007 - 11:26

The widely expected move will give the company the number one spot in the world's largest baby food market, the United States.

It will also give Nestlé's growing nutrition division – which includes infant formula, baby food, medical nutrition, weight management and performance nutrition – annual sales of about SFr10 billion.

Nestlé had lacked a baby food brand in the US and had been keen to buy Gerber for more than a decade.

Gerber, a household name in the US, will generate an estimated $1.95 billion in net proceeds from sales in 2007, a Nestlé statement said on Thursday.

"Major step"

"The acquisition of Gerber is the perfect complementary fit... This is a major step in the transformational journey of Nestlé toward a nutrition, health and wellness company," commented Nestlé chairman and CEO Peter Brabeck.

Nestlé bought Novartis' medical nutrition business for $2.5 billion in December but that deal did not include Gerber.

"Novartis is getting a lot of money and Nestlé can strengthen its core activities and build up its position in the US market," one Swiss trader commented.

Novartis, which is based in Basel, said the sale marked the end of a campaign to sell non-healthcare related operations and a transition to a group focused totally on the healthcare business.

"This transaction is the right move for Gerber, as it will become a priority business in a leading global nutrition company," Novartis chairman and CEO Daniel Vasella said in a statement.

Healthcare

The sale means Novartis will now generate 100 per cent of its sales from the healthcare business, compared with 45 per cent in 1996.

To help finance expansion in healthier food, Nestlé has sold more than $1 billion of divisions that process coffee and cocoa, and make ingredients.

In June last year, Nestlé agreed to buy Jenny Craig, a US provider of slimming programmes and diet food for $600 million, and paid $673 million in May for Uncle Toby's cereals and fruit snack bars.

Both Swiss companies say the transaction will close in the second half of 2007, subject to regulatory approval.

swissinfo with agencies

Key facts

Nestlé, which is based in Vevey on Lake Geneva, made a net profit of SFr9.197 billion in 2006 on sales of SFr98.458 billion. It is the market leader, ahead of Unilever, Kraft and Danone.
Novartis of Basel reported a 2006 net profit of $7.702 billion on sales of $37.02 billion. The company was formed in 1996 with the merger of Ciba-Geigy and Sandoz.

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Gerber

The company was founded in the US in 1928 by Daniel Gerber, who began mass-producing strained fruit for infants.

Known for the baby appearing on its jar labels, Gerber is based in Parsipanny, New Jersey.

Nestlé says that Gerber is "recognised by virtually all mothers" in the US.

It sells 190 products in 80 countries and had an operating profit of $307 million last year.

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