Pet Food Maker Branches Out to Baby Food

Sale Should Be Completed This Year

Did you know your baby food could soon be coming from the company that makes a lot of dog and cat food? In light of the recent pet food scare, does that frighten you a bit? It all results from a major purchase of a baby food company by a candy manufacturer from a European drug maker.

Swiss pharmaceutical behemoth Novartis has agreed to sell its Gerber baby food division to food powerhouse Nestle, which is itself a Swiss corporation. The sale price was $5.5 billion (U.S.), or 4.1 billion euros, and all of it in cash.

Novartis' current strategy is to focus on health care and pharmaceutical products, and this sale, to be completed in the last half of 2007, was the final step in its divestiture action. Novartis CEO Daniel Vasella said that the company has been working over the last ten years to divest itself of about 50 percent of its assets that weren't related to research and development. He added that this was "The right move for Gerber, as it will become a priority business in a leading global nutrition company".

Investors were enthusiastic about the deal. Nestle shares rose one Swiss franc and Novartis increased .05 Swiss franc on the Zurich Stock Exchange upon news of the deal being made public. Some trading experts, while praising the move by Nestle, said that the popular candy maker overpaid by about ten percent.

Nestle has been making overtures for Gerber for over ten years. It made an offer in 1994, but was outbid by Sandoz, a company that eventually merged with Ciba-Geigy to form Novartis.

Nestle was already a heavily diversified company, and has been in the baby food business for over 100 years, leading the way in baby nutrition with a product named "Farine Lactee" (French for "flour with milk"), launched in 1867 to save the life of babies unable to consume mother's milk. The food giant also has other dairy products (Carnation, La Lechera, Dryer's ice cream), chocolate (including Kit Kat), convenience foods such as Buitoni and Stouffer's, Nescafe, Nestea, and Nesquik beverages, and water products (Perrier, Nestle Pure Life).