Ferrero Inks $2.8B Deal for Nestle's US Confectionery

Ferrero Inks $2.8B Deal For Nestle’s US Confectionery Biz By Adam Rhodes

Law360, New York (January 16, 2018, 5:46 PM EST) -- Ferrero, the Italian company behind Nutella, Tic Tacs and its branded pralines, on Tuesday inked a $2.8 billion cash deal to swallow Nestle SA’s domestic confectionery business — including its Butterfinger, Baby Ruth and Wonka brands — to become the third-largest confectionery company in the United States.

Under the deal, the Ferrero Group said it would snap up 20 of Nestle’s American brands, as well as the company’s three manufacturing locations in Illinois and its related employees.

In its announcement, Nestle, considered by Forbes to be the world’s largest food company, said the business, which raked in $900 million in sales in 2016, accounts for 3 percent of Nestle Group’s sales in the U.S. While the deal also covers the food giant’s sugar brands such as Laffy Taffy, Nerds and SweeTarts, among others, it does not involve its Toll House baking products, Nestle clarified.

A Ferrero spokesperson told Law360 Tuesday that under the deal, which Nestle accepted at the end of last week, it plans to keep its current Parsippany, New Jersey, offices as well as Nestle’s U.S. confectionery office in Glendale, California.

Nestle’s CEO Mark Schneider said Ferrero is an “exceptional home” for the business.

“This move allows Nestle 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,” he said in Nestle’s announcement.

In its own announcement, the chocolate maker’s CEO Giovanni Ferrero said the confectionery business boasts “an outstanding portfolio of iconic brands with rich histories and tremendous awareness.”

“In combination with Ferrero’s existing U.S. presence, including the recently acquired Fannie May Confections Brands and the Ferrara Candy Company, we will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionery and seasonal categories, and exciting new growth opportunities in the world’s largest confectionery market,” he said.

The companies both said that the deal is expected to close near the end of 2018’s first quarter.

Tuesday’s announcement confirms rumors about a potential sale that were swirling last week.

At the time, Nestle was also rumored to be nearing a deal to buy Merck KGaA’s consumer health business, which could come with a $5 billion price tag.

Representatives for Nestle could not be immediately reached for comment Tuesday.

Ferrero is represented by a Davis Polk & Wardwell LLP team that includes John A. Bick, Daniel Brass and Abraham Einhorn. The company is additionally advised by Credit Suisse and Lazard.

Nestle is represented in-house by Andrew Glass and a Mayer Brown LLP team led by David A. Carpenter, John P. Boelter and Richard M. Assmus.

--Editing by Adam LoBelia.