Nestle, the world’s largest food company, is buying US baby-food maker Gerber from pharmaceutical firm Novartis for just over four billion euros in cash. The purchase is part of Nestle’s increased focus on health and nutrition food products.
Swiss based Novartis has been selling off its noncore businesses in recent years. The company’s Chief Executive Daniel Vasella said: “This operation means the end of our programme of disinvestment that we launched ten years ago in order to focus on the health sector and to invest more in the health sector.”
Nestle has been eager to take over Gerber for more than a decade, but failed in its previous attempt.
This gets it into the US market in a big way. There are 16.5 million babies and toddlers in the United States. Total sales there last year were worth 4.5 billion euros. Gerber dominates with 79% of the market. The other two big players are Heinz and Beech-Nut.
Nestle’s Chief Executive Peter Brabeck said Gerber is a “perfect complementary fit.” Analysts mostly agreed, though some said the price was slightly high.
Nestle said its operating profit margin would be immediately improved by the purchase. Gerber is expected to generate an estimated 1.4 billion euros in sales this year.