Swiss food giant Nestlé is to acquire Kraft Foods’ frozen pizza business in the US and Canada for US$3.7bn.
The move comes as Kraft this morning (5 January) outlined plans to use the sale to offer more cash to shareholders of hostile takeover target Cadbury.
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The business includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio, and will provide Nestlé with a new “strategic pillar” to its frozen food portfolio in the US and Canada.
“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,” said Paul Bulcke, CEO of Nestlé.
“With total sales of around CHF3bn (US$2.91bn), Nestlé will become the world leader in the attractive, fast-growing frozen pizza category.”
Bulcke said the acquisition will make it the “world leader” in frozen pizza, where the group only has a minor presence, and builds on Nestlé’s existing pizza operations in Europe. The business will be part of Nestlé USA, although the transaction is subject to US and Canadian regulatory approval.
A spokesperson for Nestlé told just-food that it was “too early to speculate” on further expansion plans, although she pointed to steady demand for frozen food in the US.
“In general, the frozen prepared food markets in the US has shown consistent growth over the last 15 years with a growth rate of over 5% per year,” the spokesperson said.
Around 3,400 Kraft employees will be brought in from two manufacturing facilities.
The frozen pizza business has an estimated 2009 EBITDA of $297m or 14.2% of sales, and an estimated EBIT of $279m. Synergies, estimated at 7% of sales, will be fully realised within five years, Nestlé said.
