Nestle to buy Gerber for $5.5 billion

FREMONT, Mich. (Dow Jones/AP) - Nestle SA announced today that it will buy the Michigan-based baby-food maker Gerber Products Co. from pharmaceutical giant Novartis AG for $5.5 billion, pushing it to No. 1 in the world's baby food market.

The deal is expected to be completed during the second half of 2007, subject to approval by regulatory authorities, said Nestle, the world's biggest food and drink company.

Gerber was started in 1928 in the small Michigan community of Fremont, in Newaygo County. Sandoz Ltd., a Swiss pharmaceutical giant, bought it in 1994.

In 1996, Sandoz merged with another Swiss pharmaceutical to form Novartis AG. Gerber dominates the baby-food market in the United States, with a 79% share, according to Morgan Stanley.

Nestle is the world's largest manufacturer of infant nutritional products - largely through its leading positions in developing countries such as Brazil and China - but had no presence in baby food in the United States.

The company said it expects Gerber to generate sales of around $1.95 billion this year.

The acquisition of Gerber, which follows Nestle's purchases of the U.S. health care and weight control company Jenny Craig and Novartis Medical Nutrition, will help the company's nutrition business to generate sales of close to $8.2 billion.

?The acquisition of Gerber is the perfect complementary fit,? said Peter Brabeck-Letmathe, Nestle chairman and chief executive officer. ?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.?

Nestle has coveted Gerber for more than a decade. It first tried to acquire the unit in 1994, but lost to Sandoz AG, which later merged with Ciba-Geigy to form Novartis. Since then, Novartis has taken steps to broaden Gerber's business beyond jarred foods.

In 2000, Gerber began selling a line of powders, oils and other toiletries for children, and in 2002 it launched microwavable meals for older toddlers. It also has a life-insurance unit. But the baby-food business has never been a good fit for a parent company that mainly sells medications.

Novartis, based in Basel, has shed several noncore businesses in recent years. In December, Novartis sold its medical-nutrition division to Nestle for $2.5 billion.

Novartis is focusing on three main areas: inventing new prescription medicines, vaccines, and selling low-cost generic drugs and over-the-counter medicines.

?This transaction is also the right move for Gerber, as it will become a priority business in a leading global nutrition company,? Daniel Vasella, Novartis chairman and chief executive, said in a statement.