Nestlé to Acquire Kraft Foods' Frozen Pizza Business for US$3.7 Billion
The sale, which is subject to customary conditions including regulatory clearances, includes the DiGiorno, Tombstone and Jack's brands in the United States, the Delissio brand in Canada and the California Pizza Kitchen trademark license.
5 Jan 2010 --- Nestlé has agreed to acquire Kraft Foods' frozen pizza business in the US and Canada for USD 3.7 billion in cash. The business includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio. This frozen pizza business provides a new strategic pillar to Nestlé’s frozen food portfolio in the US and Canada, where the Company has already established a leadership in prepared dishes and hand-held product categories under the Stouffer's, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets brands. The acquisition brings leadership in the frozen pizza category, where Nestlé only had a minor presence until now, and builds on Nestlé’s existing pizza know-how and operations in Europe. It is a natural fit with Nestlé’s focus on delivering convenient, premium, wholesome and nutritious frozen food for consumers around the world. The transaction is subject to US and Canadian regulatory approval and is expected to be completed in 2010.
Paul Bulcke, CEO of Nestlé, said: "This frozen pizza business greatly enhances Nestlé's frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery. With total sales of around CHF 3 billion, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category."
"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 Irene Rosenfeld, Chairman and CEO. "Nestle is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods."
Rosenfeld continued, "We are grateful for the hard work and dedication of our talented employees who delivered exceptionally strong results in 2009 and have helped us build this into the number one frozen pizza business in North America. We're confident the business will continue to thrive under Nestle's ownership. We wish them much continued success."
The US is the largest pizza market in the world with consumer sales of about USD 37 billion. With estimated sales of USD 2.1 billion in 2009, Kraft Foods is the leader in the frozen pizza category and has enjoyed double-digit growth in the US and Canada over the last four years. The DiGiorno and California Pizza Kitchen brands have driven the development of the premium segment, providing consumers and families attractive alternatives to eating out and home delivered pizzas. The business also includes other strong brands with Tombstone and Jack’s. In addition, Delissio is the leading frozen pizza brand in Canada.
The business will be part of Nestlé USA. "Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio," said Brad Alford, Chairman and CEO of Nestlé USA.
The business has an estimated 2009 EBITDA of USD 297 million or 14.2% of sales, and an estimated EBIT of USD 279 million. Synergies, estimated at 7% of sales, will be fully realized within five years. On a pre-synergy basis, the transaction is priced at 1.8 times estimated 2009 sales and 12.5 times estimated 2009 EBITDA. The acquisition will enhance Nestlé's earnings per share in the first full year of ownership. All above financial estimates are based on Nestlé's IFRS accounting standards.
In a separate statement Nestle ruled itself out of a takeover attempt for Cadbury. “After discussions with the UK Takeover Panel regarding the potential for further speculation in respect of Cadbury following Nestlé’s recent announcements, Nestlé confirms that it does not intend to make, or participate in, a formal offer for Cadbury,” the company reported.
Meanwhile Kraft Foods has announced that it will extend the acceptance period for Cadbury plc securityholders to tender their shares from January 5 to February 2, 2010. This is common practice in the UK and in no way changes the terms of the offer or other deadlines set for this potential transaction under the UK takeover code.
