Nestle to Buy Gerber from Novartis for $5.5B

Nestlé has agreed to acquire Gerber for $5.5 billion in cash from Novartis, in what appears to be a win-win deal. Nestlé will control the leading position in the U.S. baby food market and enhance its Nutrition division. Novartis will complete its portfolio restructuring divesting of non-core businesses. The transaction is expected to close in the second-half of this year, subject to standard regulatory approvals. Ordinary shares of Novartis are up fractionally in morning trading in Zurich, but Nestlé’s ordinary shares are down nearly 1%. Nestlé said the Gerber acquisition will be EPS neural in its first full year and accretive in its second full year. Coverage by The Wall Street Journal says Gerber has a 79% share of the baby-food market in the U.S., according to Morgan Stanley. Last December, Nestlé acquired Novartis' medical-nutrition division for $2.5b. Media reports note Nestlé tried to acquire Gerber in 1994, but lost to Novartis' predecessor, which bought it for $3.7b.

Sources: Press release, Bloomberg, The Wall Street Journal
Commentary: Novartis Lowers Growth Forecast On Suspension of Zelnorm Sales; Shares Fall • Teva v. Novartis: Federal Decision Has Broad Implications For Generics • Nestle to Purchase Novartis Medical Nutrition Unit
Stocks/ETFs to watch: Nestlé (NSRGY.PK), Novartis AG (NVS)
Related: Nestle-Gerber Acquisition Presentations [i, ii (pdf)], Nestle Conference Call Webcast, Novartis Newsroom

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