Nestle sells U.S. candy business to Ferrero for $2.8 bln amid health push (updated)

Chocoladefabriken Lindt & Spruengli AG

16/01/2018 17:54

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    By Martinne Geller and Francesca Landini 
    LONDON/MILAN, Jan 16 (Reuters) - Swiss food group Nestle 
 NESN.S  has agreed to sell its U.S. confectionery business to 
Italy's Ferrero for $2.8 billion, it said on Tuesday, marking 
CEO Mark Schneider's first big sale and a small step on its path 
towards healthier products. 
    Nestle, the world's biggest packaged-food company, has cited 
its weak position in the United States, where it trails Hershey 
 HSY.N , Mars Inc and Lindt, as the rationale for a sale. But 
reduced exposure to chocolate also fits Nestle's goal of 
becoming a "nutrition, health and wellness" company.  
    Though Nestle is hanging on to non-U.S. confectionery  
operations, bankers and analysts have said it might wind down 
its interest further.  
    Nestle's U.S. business, home to mass-market products 
BabyRuth, Butterfinger and Crunch, has been underperforming 
rivals for years as consumers have turned increasingly towards 
healthier snacks such as fruit bars and premium chocolate brands 
such as Lindt  LISN.S . 
    The change of focus has prompted Nestle to bid for the 
vitamin and supplements business being sold by Germany's Merck 
 MRCG.DE  after agreeing last month to buy vitamin maker Atrium 
Innovations.  urn:newsml:reuters.com:*:nL8N1O55FA  urn:newsml:reuters.com:*:nL8N1P547H  
    "The switch of assets makes a lot of sense," Vontobel 
analyst Jean-Philippe Bertschy said of the U.S. disposal and 
move into vitamins. "You're going out of a weak business in 
terms of financials and ... entering a market with strong growth 
and higher margins." 
     For family-owned Ferrero, meanwhile, the proposed deal 
offers a chance for the Italian company to build scale quickly 
in the United States. 
    The maker of Nutella spread and Ferrero Rocher pralines will 
become the third-largest chocolate company in the United States 
and globally, according to Euromonitor International.  
     
 
 (Reporting by Martinne Geller in London; Editing by David 
Goodman) 
 ((martinne.geller@thomsonreuters.com; +44)(0)(2075420797; 
Reuters Messaging: martinne.geller.reuters.com@reuters.net)) 
 
Keywords: NESTLE M&A/FERRERO