Nestle to Purchase Novartis Medical Nutrition Unit

Nestle SA will acquire Novartis AG's medical nutrition unit for $2.5 billion. The chocolate company is looking to expand into the high margin specialized hospital nutrition market, which is estimated to be expanding at a rate of 7% a year, compared to the general food market's 1 to 2%. This unit, which has sales of about $950 million, focuses on high protein food for cancer and post surgical patients as well as devices such as stomach pumps. The deal will officially close during the second half of next year and will put Nestle in second place medical nutrition segment, where until now it has not had significant impact. This acquisition complements its recent purchase of U.S. weight loss company Jenny Craig for $600 million. Analysts are generally pleased with the move, but concerned that Nestle might have overpaid. Some are also unhappy with the division's profitability.
• Sources: Bloomberg, MarketWatch.com, Reuters
• Related commentary: Novartis May Sell Gerber Unit To Nestle, Big Pharma's Big Decision: Diversify Or Focus?, Novartis: Strong Growth and Reasonable Valuation
• Potentially impacted stocks and ETFs: Novartis (NVS), Nestle SA (NSRGY.PK) ETFs: Europe 2001 HOLDRs (EKH) , BLDRS Europe 100 ADR Index (ADRU)

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