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Nestlé has said it will sell its US confectionery unit to Ferrero for $2.8 billion, confirming earlier reports and ending months of speculation regarding the future of the business.
Last week, FoodBev reported that Ferrero was closing in on the deal, which makes it the third-largest confectioner in the US after Hershey and Mars.
The Italian company – best known for making Nutella, Tic Tacs and Ferrero Rocher – is keen to expand its business in the US following last year’s purchases of Ferrara Candy and boxed chocolate company Fannie May.
Nestlé’s US arm includes well-known brands such as Butterfinger and Nerds, stripped off by Swiss-based Nestlé so that it could focus on other areas of its business. In 2016, the division turned over approximately CHF 900 million ($935 million).
Today’s announcement comes exactly seven months after Nestlé first revealed its intention to sell.
Nestlé CEO Mark Schneider said: “With Ferrero, we have found an exceptional home for our US confectionery business where it will thrive. At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition.”
The transaction only covers Nestlé’s US-focused confectionery brands and does not include the iconic Toll House baking products, a strategic growth brand which Nestlé will continue to develop. The company remains fully committed to growing its international confectionery business around the world, particularly through KitKat, Nestlé said.
Giovanni Ferrero, executive chairman of the Ferrero Group, said: “We are very excited about the acquisition of Nestlé’s US confectionary business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness. In combination with Ferrero’s existing US presence, including the recently acquired Fannie May confections brands and the Ferrara Candy Company, we will have substantially greater scale; a broader offering of high-quality products to customers across the chocolate snack, sugar confectionery and seasonal categories; and exciting new growth opportunities in the world’s largest confectionery market.
“We look forward to welcoming the talented team from Nestlé to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market.”
The acquisition includes Nestlé’s US manufacturing facilities in Bloomington, Franklin Park and Itasca, Illinois – as well as other locations in California, Illinois and New Jersey.
Ferrero Group CEO Lapo Civiletti continued: “Our commitment to deliver value to North American consumers and customers will be strongly enhanced by the arrival in our portfolio of such powerful confectionery and chocolate brands.”
Also changing hands as part of the deal are brands like Crunch, BabyRuth, BottleCaps, 100Grand and Raisinets.
Last month, Hershey bought Tyrrells and Skinny Pop owner Amplify Snack Brands in a deal worth around $1.6 billion as it expands away from high-sugar foods.
Nestlé announced last June that it was considering putting its confectionery business up for sale. The unit generated $924 million in sales last year.
The world’s biggest food company has been under pressure to sell underperforming areas of its business after hedge fund Third Point invested $3.5 billion in the company in June.
When completed, the deal will be the first major Nestlé divestment since Mark Schneider took over as CEO. He said the company aims to focus high-growth categories like coffee, infant nutrition, pet care and bottled water. Between them, they account for more than half of group sales and are growing almost 2% faster than Nestlé’s other categories.
Towards the end of last year it bought vitamin producer Atrium Innovations for $2.3 billionand US coffee brand Chameleon Cold-Brew.
Both Nestlé and Ferrero expect the deal, subject to regulatory approval, to close at the end of this quarter.
© FoodBev Media Ltd 2018