Nestle buys Novartis Medical Nutrition for US$2.5bn

Nestle SA, the world's biggest food and beverage company and Novartis International AG, a multinational pharmaceutical firm on Thursday entered into a definitive agreement under which Nestle will acquire the entire medical nutrition business of Novartis for a total amount of USD 2.5 billion.

By acquiring Novartis’ Medical Nutrition business unit, Nestlé is contributing to its efforts to strengthen the Group's leading position in nutrition. With the acquisition, the Vevey, Switzerland based Nestlé has secured a strong number two position in the rapidly growing and profitable healthcare nutrition segment.

"I am very pleased that this acqui¬sition allows us to become a very strong player in the strategic core category of nutrition. I welcome the people from Novartis who will strengthen our capability in healthcare nutrition, including specific R&D,” said Peter Brabeck-Letmathe, Chairman and CEO of Nestlé.

“This is a very important step for the Nestlé Group in its strategic trans¬formation process to a nutrition, health and wellness company as it strengthens the core of our globally managed Nestlé Nutrition business," he added.

With expected revenue of approximately US$950 million in 2006, the Gland, western Switzerland based Medical Nutrition, a business unit of the Novartis Consumer Health Division, is the world number two in its field. Being active in over 40 countries and employing about 2,000 people, the Medical Nutrition supplies enteral nutrition, oral nutrition and medical devices used to provide essential nutrients to patients with specific medical conditions.

In a separate announcement, Novartis Chairman and CEO Dr. Daniel Vasella said, "Following our long-term strategy, this divestment continues to enhance our focus on healthcare, further strengthens our financial position and provides strategic flexibility."

"We also believe that this transaction offers the ideal fit for the Medical Nutrition business and the best opportunities for Medical Nutrition associates and management," Dr. Vasella further added.

Proceeds of the transaction would be used to strengthen the company’s financial position as well as provide additional strategic flexibility, the Basel, Switzerland based Novartis said.

The sale does not include the Gerber baby food division, the pharmaceutical firm said.

As a result of the acquisition, about 2,000 employees of Medical Nutrition with their respective position and expertise will move to the Nestlé Group.

The deal, which still requires customary regulatory approvals, is expected to be completed during the second half of 2007, both the companies confirmed in their respective online releases.

Nestle shares rose 1.0 percent to 434 Swiss francs (US$360) in Zurich by midmorning, while shares in Novartis were up 0.6 percent at 70.50 Swiss francs (US$58.43).