Nestle's Gerber acquisition cleared by EU

By Karen Willmer

- Last updated on GMT

Related tags: Baby food, European union, Nestlé

The European Commission has cleared Nestle's proposed
acquisition of Novartis's Gerber business, saying it would not
lead to an uncompetitive concentration in baby foods and
cereals.

The acquisition, announced in April this year, is worth $5.5bn (€4bn), and highlights Nestle's continuing expansion into a nutrition, health and wellness company. The company has also acquired Jenny Craig, the Australian cereal business Uncle Toby's, and Novartis Medical Nutrition within the past year. "Although the transaction would enhance the portfolio of Nestle's products, the commission did not identify any vertical and conglomerate competition concerns arising from the transaction,"​ the European Commission said in a statement on Friday. In Europe, Gerber manufactures and sells baby food such as baby meals in jars, baby drinks and cereals. In April, Peter Brabeck-Letmathe, chairman of Nestle, said that the acquisition of Gerber is a "perfect complementary fit". "It not only gives Nestle the leadership position in baby food, but it also constitutes a decisive step to establish Nestle Nutrition as the undisputed global leader in the nutrition field,"​ he said. According to Nestle Nutrition, the acquisition will transform the unit into a business approaching CHF (€6.1bn) in sales. Last month the company said it is eyeing organic growth in health, wellness and nutrition of five to six per cent over the next ten years. Gerber is reported to be one of the most trusted brands amongst consumers in the US, with net sales estimated to approach $2bn for 2007. The company also enjoys strong positions in Mexico, Poland and Central America. "The activities of the parties overlap in several segments of manufactured baby food inPoland,Cyprus,IcelandandPortugal,"​ the European Commission said. "In all the countries concerned, baby food markets are characterised by rapid growth." ​In Poland, it said the proposed merger would not "significantly impede effective competition"​ due to the competitiveness of the market and the limited overlap of the baby food segments. In Cyprus, Iceland and Portugal, the Commission said market entry, "is relatively easy as all the manufacturers sell via distributors and a number of new entrants had been able to grow their market shares quickly in recent years"​. The statement added that there are also many competitors in these markets. Nestle recently exceeded financial expectations with full-year organic growth boosted by the company's focus on nutrition, research and core brands. Sales at the group rose to CHF98.5bn (€60.5bn) while organic growth was 6.2 per cent and net profit was up 13.8 per cent to CHF9.2bn (€5.6bn).

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