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Novartis sells food unit to Nestlé

Nestlé will become the second biggest provider of medical nutrition

(Keystone)

Swiss pharmaceutical giant Novartis will sell its Medical Nutrition business to Swiss food group Nestlé for $2.525 billion (SFr3.04 billion).

As a result of the deal, announced on Thursday, about 2,000 employees of Medical Nutrition with their specific expertise will join the Nestlé Group.

Based in Gland, western Switzerland, Medical Nutrition is expected in 2006 to generate around $950 million in net sales and around $90 million of operating income. It is active in around 40 countries.

"Following our long-term strategy, this divestment continues to enhance our focus on healthcare, further strengthens our financial position and provides strategic flexibility," said Novartis CEO Daniel Vasella.

"We also believe that this transaction offers the ideal fit for the Medical Nutrition business and the best opportunities for Medical Nutrition associates and management."

Novartis sold its nutrition unit, which makes Isotar energy drinks, to Dutch bank ABN Amro for $271 million in March.

Medical Nutrition, part of the Basel-based business's consumer health division, is the number two global supplier of intestinal nutrition, oral nutrition and medical devices used to provide essential nutrients to patients with special medical conditions.

These products are often required when illness, surgery or disability limit the ability of patients to eat a balanced diet.

Strategy

"I am very pleased that this acquisition allows us to become a very strong player in the strategic core category of nutrition, including specific research and development," said Peter Brabeck, Nestlé chief executive and chairman.

"This is a very important step for the Nestlé Group in its strategic transformation process to a nutrition, health and wellness company as it strengthens the core of our globally managed Nestlé Nutrition business."

Brabeck has sold coffee, cocoa and dairy processing units to focus on more lucrative health forms and higher-priced drinks.

In November Vevey-based Nestlé invested SFr25 million ($20.8 million) in a joint project with the Federal Institute of Technology in Lausanne to develop new products that boost brainpower.

In a separate statement, Nestlé said it did not expect the deal, which requires regulatory approvals and is expected to be completed in the second half of 2007, to have any material impact on earnings in the short term.

swissinfo with agencies

In brief

Nestlé, the leading food business ahead of Unilever, Kraft and Danone, is among the first 30 companies in the world in terms of capital.

It employs around 250,000 people in five continents. In 2005 its sales totalled SFr91 billion and its net profit was SFr7.9 billion.

The giant is moving towards the health and wellbeing sectors.

Its research centre is located at Vers-chez-les-Blanc, near Lausanne and was founded in 1997. It employs 650 people from 50 countries from, among others, the fields of medicine, biochemistry and microbiology.

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Key facts

Last year healthcare market researchers IMS Health rated Novartis as the fourth largest drugs firm in the world in terms of total pharmaceutical sales (SFr27.08 billion) and estimated the Basel-based giant had a 5.05% share of the total market.
Novartis turned in a record profit of SFr7.8 billion ($6.1 billion) with net sales of SFr41.7 billion in 2005.

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