Nestlé to parent Gerber baby foods

GENEVA, Switzerland - The famous Gerber Baby is changing parents.

Nestlé SA said yesterday that it was buying Gerber Products Co. for $5.5 billion, giving the world's biggest food and drink company the largest share of the market for baby food.

The acquisition from pharmaceutical-maker Novartis SA helps further Nestlé's recent focus on health and nutrition, following its purchases of the U.S. weight-control company Jenny Craig and Novartis Medical Nutrition.

Nestlé, which owns brands such as Nescafe, Perrier and Dreyer's, also is the world's largest manufacturer of infant nutritional products - largely through its leading positions in developing countries such as Brazil and China. But it had no presence in baby food in the United States.

The cherubic face of the happy Gerber infant dominates the U.S. baby-food market, with the company's holding a 79 percent share, according to Morgan Stanley.

"The acquisition of Gerber is the perfect complementary fit," said Nestlé's chairman and chief executive officer, Peter Brabeck-Letmathe. "It not only gives Nestlé the leadership position in baby food, but it also constitutes a decisive step to establish Nestlé Nutrition as the undisputed global leader in the nutrition field."

Adding Gerber will increase the company's nutrition business to annual sales of close to $8.2 billion. The company said it expected Gerber to generate sales of about $1.95 billion this year and to have a 10 percent sales growth in the long run.

Analysts said that, although the price appeared high at first sight, it was in line with similar deals.

"Added to Nestlé's existing baby-food business in the U.S. and its overall North American business, this makes Nestlé a very clear leader in infant nutrition in the U.S., where, unlike Western Europe, having babies remains in vogue," said Rob Mann, a Collins Stewart food analyst in London.

Nestlé has coveted Gerber for more than a decade, first trying to acquire it in 1994, but losing out 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, it sold its medical-nutrition division to Nestlé for $2.5 billion. Novartis is focusing on three main areas: inventing prescription medicines, vaccines, and selling low-cost generic drugs and over-the-counter medicines.