Win-win situation for both Nestle and Kraft

Nestle S.A., Vevey, Switzerland, confirms that it does not intend to make, or participate in, a formal offer for Cadbury, making it easier for Kraft Foods Inc. to pursue its hostile takeover of the confectionery company.

 

Instead, the Swiss-based giant has agreed to acquire Kraft's frozen pizza business in the U.S. and Canada for $3.7 billion. Brands include DiGiorno, Tombstone, California Pizza Kitchen, Jack's and Delissio, two Wisconsin manufacturing facilities, as well as an option to assume leases for pizza depots and delivery trucks. The acquisition, which generated some $1.6 billion in 2009, would make Nestle one of the largest players in the U.S. frozen foods market. It already owns the Stouffer's brand and the Hot Pockets brand (purchased in 2002 from Chef America Inc.).

 

Undoubtedly a perfect fit for Nestle, the frozen pizza purchase is somewhat surprising in that the company has for the past few years concentrated on acquisitions in health and wellness (Jenny Craig, Gerber and Novartis Medical Nutrition).

 

"This frozen pizza business greatly enhances Nestle's frozen food activities in North America, bringing together a selection of great U.S. and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery," said Nestle CEO Paul Bulcke.

It's also a win-win for Kraft.  "Selling this business now not only delivers an attractive return for our shareholders but enables us to better focus our resources on priority global brands and categories," said Kraft Chairman and CEO Irene Rosenfeld.