Nestle shares rise as Ferrero agrees to buy its US confectionery business

on Jan 17, 2018

Nestle shares are trading higher Wednesday, after an announcement it will sell its US confectionery business to Ferrero for $2.8 billion. The sale will make Ferrero the third biggest confectioner in the US and leave the Swiss brand free to focus on other areas.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

By 1235 BST, Nestle shares were trading 0.53% higher at CHF83.06. Shares moved as high as CHF83.22 earlier in the session.

Nestle US brands sale details

The deal will see US brand Ferrero purchase Nestle’s US chocolate and sweet brands in an all cash purchase. Once the sale is approved, it is expected to be finalized by March this year.

Ferrero will then be the owner of: Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky, OhHenry! and SnoCaps, and US sugar brands including SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts.

"With Ferrero we have found an exceptional home for our US confectionery business where it will thrive,” said Nestle CEO Mark Schneider.

“At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition,” Schneider added.

Nestle will retain ownership of its US Tollhouse baking products and is also continuing to focus on its global KitKat brand.

Purchase to boost Ferrero’s sales earnings

Nestle US confectionery products generated sales of around $900 million in 2016, which would be a great addition to Ferrero’s earnings power.

The Italian confectioner already makes and sells popular products including, Tic Tacs, Nutella spread and Ferrero Rocher. This deal will also see Ferrero acquire Nestle’s US manufacturing facilities in Bloomington, Franklin Park and Itasca, Illinois.

 “We are very excited about the acquisition of Nestlé’s US confectionary business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness,” said Ferrero Group executive chairman, Giovanni Ferrero.

“In combination with Ferrero’s existing US presence, … we will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionary and seasonal categories, and exciting new growth opportunities in the world’s largest confectionary market,” Ferrero added.