Sale of Kraft’s frozen pizza business to Nestlé sees revised Cadbury offer

Posted by Isobel Drake on 6th January 2010

Nestlé has agreed to acquire Kraft Foods’ frozen pizza business in the US and Canada for US$3.7 billion in cash (A$4.04b), allowing the US manufacturer to alter their Cadbury bid.

The frozen pizza business provides “a new strategic pillar to Nestlé’s frozen food portfolio in the US and Canada”, the company suggested, with a major acquisition by the food giant not coming as much of a surprise following this week’s sale of a stake in Alcon.

Kraft, meanwhile, will use the funds from the sale to raise the cash percentage of their offer to Cadbury shareholders, although the value of the bid will remain unchanged. And they now have one less potential counterbidder to worry about, with Nestlé confirming they would not make a formal offer for the confectioner.

“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 Swiss maker of Nescafe said in a statement.

American expansion

“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,” Paul Bulcke, CEO of Nestlé, said. “With total sales of around CHF 3 billion, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category.”

Nestlé, the world’s largest food manufacturer, has made the move just months after selling the license to their frozen meal brands in Australia to Simplot.

The US is the largest pizza market in the world with consumer sales of about US$37 billion. With estimated sales of 2.1 billion in 2009, Kraft Foods is the leader in the frozen pizza category.