Food-service giant Aramark going private

 

Aramark Corp., the largest U.S.-based food-service company, will be taken private after shareholders overwhelmingly approved a $6.3 billion buyout bid Wednesday.

Of 606 million votes cast — mostly by proxy — 592 million, or 97 percent, supported the bid to put Aramark in private hands. Fewer than 100 attended the shareholder meeting.

Colgate-Palmolive to Sell Bleach Brands to Clorox

Colgate-Palmolive Co. said Wednesday it will sell its Latin American and Canadian bleach brands to Clorox Co. for $126 million.

Colgate, New York, said the sale includes bleach brands Javex, Agua Jane and Nevex and the license of the Ajax brand for a transition period in Colombia, the Dominican Republic and Ecuador.

Colgate Chairman and Chief Executive Reuben Mark said in a news release that the sale is part of the company's plan to divest itself of noncore businesses in favor of oral and personal-care businesses.

Colgate said the sales, which require regulatory approvals, will result in a gain of $70 million.

Don Knauss, Clorox's chairman and CEO, said in a news release, "These acquisitions extend our position as the bleach market leader in the Americas." Clorox is based in Oakland, Calif.

Hain to buy Avalon Natural Products for $120 million

The Hain Celestial Group Inc. said on Monday it would buy Avalon Natural Products Inc., a maker of organic and natural skin and hair care products, for $120 million.

The deal to acquire the Avalon Organics and Alba Botanica brands from private equity firm North Castle Partners, L.L.C. is expected to add to earnings in 2008, Hain said.

"The acquisition of the Avalon Organics and Alba Botanica brands will strengthen Hain Celestial as one of the leading natural and organic personal care products companies in a category that is experiencing double-digit growth," Hain Chief Executive Irwin Simon said in a statement.

In the most recent fiscal year, Avalon and Alba logged sales of over $40 million, Hain said. That would bring Hain's annual personal care sales to about $125 million, Simon said.

Hain recorded overall sales of $739 million in its fiscal year ended in June.

The acquisition is expected to close in early 2007.

New York investment bank Sagent Advisors advised Hain on the deal, a spokesman for Sagent said.

Nestle to Buy Novartis Unit,
Expand Nutritional Operations

Nestle SA said Thursday it is buying the medical-nutrition business of Swiss drug maker Novartis AG for $2.53 billion, in a deal that underlines the world's largest food company's determination to focus more on health food and wellness products.

For Novartis, based in Basel, the deal means a further step in focusing on medical products, ranging from prescription medicines to generics and vaccines. The company still owns the Gerber brand of baby-food products, which isn't part of the deal.

For Nestle, based in Vevey, Switzerland, the deal represents a big leap forward in its strategy to expand its operations in nutrition, a market it expects to grow at a faster pace than the traditional food market. Nestle is willing to pay a hefty sum for the unit, acquiring it at a price of around 2.8 times annual sales, but the company will still lag in size behind Dutch baby food and nutritional supplement company Royal NumicoNV in that particular food-market niche.

"This is a very important step for the Nestle Group in its strategic transformation process to a nutrition, health and wellness company as it strengthens the core of our globally managed Nestle Nutrition business," said Nestle chief executive Peter Brabeck-Letmathe.

Novartis, based in Basel, said the deal still requires approval from regulators and will probably be completed in the second half of 2007. "Following our long-term strategy, this divestment continues to enhance our focus on healthcare, further strengthens our financial position and provides strategic flexibility," said Daniel Vasella, Novartis chairman and chief executive.

With annual sales of $950 million, Novartis's medical nutrition business is the world's second-largest supplier of medical nutrition and medical devices used to provide essential nutrients to patients with special medical conditions. These products are often required when illness or disabilities limit the ability of patients to eat a balanced diet.

Nestle already has a nutrition business, but its strengths are in other geographic regions and in different products. Because the two businesses are complementing each other nicely, Nestle doesn't expect the acquisition to have a material impact on group earnings in the short term.

Nestle also said that all options concerning a possible share buyback are open. "We will make an announcement about any share buyback in due time," said Nestle spokesman Francois-Xavier Perroud.

Nestle's failure to announce another share buyback has recently encouraged speculation that the food company may be savings its cash for a big takeover.

The acquisition had been expected after several media reported in recent weeks that the two companies are in talks.

Gold Kist accepts Pilgrim's Pride's $1.1 billion merger bid

Pilgrim's Pride Corporation is to acquire the outstanding shares of Gold Kist common stock for $21 per share in cash. The transaction, which was unanimously approved by the boards of directors of both Pilgrim's Pride and Gold Kist, is valued at $1.1 billion, plus the assumption of approximately $144 million of Gold Kist's debt.

The Pilgrim's Pride offer represents an approximately 62% premium over Gold Kist's closing stock price on August 18, 2006, the last day of trading before Pilgrim's Pride notified Gold Kist's board of directors in a public letter that it was offering to purchase the company.

Pilgrim's Pride expects to achieve approximately $50 million of annualized synergies, primarily from the optimization of production and distribution facilities and cost savings in purchasing, production, logistics and SG&A (selling, general and administrative expenses). Pilgrim's Pride predicts the acquisition will increase the company's diluted earnings per share after the first full year of operations.

A.D. Frazier, chairman of Gold Kist, said: "After careful consideration, the special committee of independent directors, as well as our entire board, determined that the Pilgrim's Pride enhanced offer is in the best interests of our shareholders, employees, growers and customers.

"Since becoming a public company more than two years ago, Gold Kist has made significant progress in achieving its business goals. We look forward to working with the Pilgrim's Pride board and management on a smooth integration, and we recommend that all stockholders embrace this transaction by tendering their shares into the premium offer."

Together, Pilgrim's Pride and Gold Kist will create the world's leading chicken company in terms of production and the third-largest US meat protein company by revenues. The combined company will have a broad geographic reach and customer base, while maintaining a balanced portfolio of fresh chicken and value-added products.

New Chief at Pfizer Will Reduce Sales Force

Pfizer, the world’s largest drug company, said yesterday that it would lay off almost 2,400 sales representatives and managers, which is a fifth of its United States sales force but only 2 percent of its overall worldwide work force.

The move may indicate the beginning of a wider retrenchment by Pfizer and the rest of the drug industry.

Drug makers have sharply increased the size of their sales forces over the last decade as the research productivity of the companies has plunged and the pipeline of important new drugs has dwindled.

The bloated sales forces, analysts say, have alienated doctors and contributed to high drug prices.

Because Pfizer led the sales force expansion, other companies will probably follow its decision to cut back, said Michael Krensavage, a drug industry analyst at Raymond James.

“The other companies were reluctant to cut their sales forces while Pfizer was continuing to have people on the ground,” he said. “It seems like it’s the end of an arms race.”

Drug sales representatives promote medicines by visiting doctors’ offices to offer physicians promotional literature, journal articles and free samples for patients. But many doctors now complain that they are overrun by too many representatives who have little useful information.

Now, with revenue barely rising at most companies and Democratic leaders in Congress vowing to wring savings from the Medicare prescription drug program, drug makers are under pressure to bring their costs down.

In a statement about the layoffs, Pfizer said it would announce more “actions for transforming the company” in January.

The restructuring program comes on top of an earlier set of layoffs that trimmed Pfizer’s work force by 5,300 employees since early 2005, according to a Pfizer filing with the Securities and Exchange Commission.

The new cuts are one of the first moves by Jeffrey B. Kindler, the former General Electric executive who in July replaced Pfizer’s ousted chief executive, Hank McKinnell. Mr. Kindler has pledged to review every aspect of the company’s operations.

Pfizer has also promised to reduce its overall costs in 2007 compared with 2006, and further reduce them in 2008.

Paul Fitzhenry, a Pfizer spokesman, said the company expected to notify affected employees by mid- to late December. The layoffs should be complete by Jan. 1, he said.

The layoffs will be spread broadly across the United States sales force, including both field representatives and managers, not confined to any geographic area or category of drugs.

Pfizer did not disclose details of the severance packages employees would be offered.

Pfizer has 106,000 employees worldwide, including 42,000 in the United States. Its sales force, including managers, totals just under 12,000 in the United States and another 24,000 outside the United States. The cuts announced yesterday do not cover the international sales force.

The company made the announcement after the close of trading yesterday, during which shares of Pfizer rose 8 cents, to $27.05. In after-hours trading shares were up an additional 20 cents. Pfizer shares have risen 16 percent this year but are still down by almost half from the highs they set six years ago.

“This is overdue,” said Les Funtleyder, an industry analyst at Miller Tabak. “Pfizer was probably the innovator in the ‘Mongol horde’ approach to the sales force, and that model served them well in the past. Now they simply don’t need as many.”

Like other big drug companies, Pfizer remains very profitable. Last year, the company had $14 billion in profits, excluding one-time charges, on $51 billion in sales.

But despite a $7 billion annual research budget, Pfizer has had deep difficulties bringing new drugs to market.

Earlier yesterday, Pfizer announced it had ended a research collaboration with a European company to develop asenapine, a treatment for schizophrenia that analysts had predicted could be a multibillion-dollar drug.

Pfizer has also run into unexpected problems with torcetrapib, a drug meant to raise so-called goodcholesterol. Torcetrapib appears to raise blood pressure slightly in patients, a serious side effect for a drug intended to reduce heart disease.

As a result, most analysts now believe that the Food and Drug Administration will not approve torcetrapib unless Pfizer can prove through studies that it reduces heart attacks and other cardiovascular problems. That data will probably not be available until at least 2010.

Tomorrow, Pfizer will play host to an all-day conference with analysts, investors, and the news media at its research campus in Groton, Conn., to discuss its pipeline of new drugs. Analysts are expecting greater transparency from the company, which in the past has been reluctant to discuss its early-stage drug candidates.

Novartis, Focused on Medicine, May Shed Gerber

 

Nestlé Weighs Buying Unit
It Has Long Sought as Part
Of Deal Already on the Table

Novartis AG may be prepared to sell Gerber Products Co., one of the world's largest and best-known makers of baby food, and could have a willing buyer in Nestlé SA.

Novartis, a Swiss pharmaceutical concern, already is in negotiations with Nestlé, also of Switzerland, to sell a medical-nutrition business. Nestlé executives are toying with the idea of trying to make the acquisition of Gerber part of the same deal, according to people familiar with the matter.

Novartis Chief Executive Daniel Vasella said in an interview yesterday that the company "probably would act opportunistically" if an offer for Gerber emerged, although he added that there was no auction for Gerber under way.

Gerber, of Fremont, Mich., and Novartis's medical-nutrition business together would fetch between $4 billion and $5 billion, estimate people familiar with the matter. They figure Gerber alone would be valued at more than $3 billion.

Nestlé has been hungry for Gerber for more than a decade. Even though the market for infant purées and other mushy concoctions has been relatively slow growing, the profit margin for baby food is among the highest in the prepared-food industry, at 24% in the U.S., compared with 16% for all packaged food, according to Morgan Stanley.

If Novartis decides to part with Gerber, Nestlé may have to compete with others for the business. Numico NV of the Netherlands, the maker of Nutrica baby food and other brands, is also likely to be interested, as would private-equity firms, people close to those firms say.

Dr. Vasella said Gerber is growing and profitable but has been challenged by other baby-food brands undercutting its prices. And, he said, Novartis is trying to focus on medicines and vaccines. Dr. Vasella said nutrition, including Gerber, was a "more tangential" business for the company, although he also said that didn't mean the nutrition business necessarily had to be sold.

Gerber is part of Novartis's consumer-health division, which also includes over-the-counter medicines, animal-health products, medical nutrition and Ciba-brand contact lenses. The consumer-health unit had total sales of $7.3 billion last year, representing about 23% of Novartis's sales of $32.2 billion. The prescription-drug unit had sales of $20.3 billion last year.

Nestlé first tried to acquire Gerber in 1994, but lost 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.

Nestlé is the world's largest manufacturer of infant nutritional products, largely through its leading positions in fast-growing developing countries such as Brazil and China, as well as some European countries such as Spain. However, in the U.S., the world's largest infant-nutrition market, it has a small No. 3 position in infant formula, behind the two dominant players, Bristol-Myers Squibb Co. and Abbott Laboratories.

Nestlé has no presence in baby food in the U.S., where Novartis, thanks to Gerber, is dominant with a 79% market share, according to Morgan Stanley.

Infant nutrition is one of the best businesses in the food industry because it has strong customer loyalty and limited competition from private labels. Once parents find a formula or food for their babies that they like and trust, they tend to stick to it and are willing to pay higher prices. As a result, it is difficult for new companies to break into the business without buying an established brand.

That could make Gerber an attractive asset for Nestlé Chief Executive Peter Brabeck, who has steadily rearranged Nestlé's food portfolio in the past 10 years, shedding underperforming businesses and making major acquisitions in pet food, ice cream and diet products. Infant nutrition remains one of the last major gaps in Nestlé's portfolio, particularly in the U.S.

In the past several years, Mr. Brabeck has made Nestlé's nutrition business, from sports nutrition to clinical nutrition, a major priority, betting that growth and profits will come from health-related areas.

In 2005, Nestlé's sales from nutrition products amounted to 5.2 billion Swiss francs ($4.3 billion), half of that in infant formula and a third of it from baby food. Along with the Nestlé brand, it also owns the Neslac, Nan and Cerelac brands. Nestlé has a goal of raising annual growth in sales of nutrition products to about 10% in the long term from 6.1% achieved in the first nine months of this year. The company wants to raise the operating-profit margin in the division to 20% from around 17% now.

Novartis has also been realigning its business. The company is pursuing three main areas: inventing new prescription medicines; vaccines; and selling low-cost generic drugs and over-the-counter medicines.

Switzerland's Givaudan said it has agreed to buy the Quest flavors and fragrance unit of Imperial Chemical Industries PLC for $2.28 billion to become the world's largest maker of scents used in perfume.

Quest, based in Naarden, the Netherlands, had sales of $1.1 billion last year and a trading profit of $98.7 million.

"Since Quest cannot become a top three player in its market, ICI has readily acceded to an offer," said analysts at Fortis Investment Research.

John McAdam, ICI's chief executive, said Wednesday that the sale was a major step in realigning ICI.

Givaudan, based in Geneva, said it would finance the acquisition by debt and by issuing up to $800 million in new shares.

"It's a good price, given Quest's progress in the past few years and its improvement in profitability," Givaudan Chief Executive Officer Gilles Andrier said.

PepsiCo to buy Naked Juice to compete with Coca-Cola

 

PepsiCo Inc., the world's second- largest soft-drink maker, agreed to buy Naked Juice Co. to expand sales of natural-juice drinks and compete with Coca-Cola Co.'s Odwalla brand.

Naked Juice makes 25 vitamin-fortified drinks such as a pineapple-banana protein shake. The company has annual sales of more than $150 million, the Azusa, California-based company said today in a joint statement with PepsiCo. Terms of the deal weren't disclosed.

PepsiCo acquired healthier beverage and food companies including Izze and Stacy's Pita Chips in the past year to lure drinkers shunning sugary sodas. Chief Executive Officer Indra Nooyi is adding Naked Juice to try to win consumers from Odwalla juices and smoothies, which Coca-Cola bought in 2001.

``We think Pepsi's recent acquisition activity highlights the company's level of commitment relative to Coke in terms of adding high growth, non-carb brands to continue to reposition its beverage portfolio,'' wrote John Faucher, an analyst with JP Morgan Securities Inc., in a research note today.

Faucher estimates PepsiCo will pay about $450 million to buy Naked Juice from North Castle Partners, a private-equity firm based in Greenwich Connecticut. He is assuming a price of three times Naked Juice's annual revenue.

Shares of Purchase, New York-based PepsiCo rose 6 cents to $62.56 at 4 p.m. in New York Stock Exchange composite trading. PepsiCo shares are up 5.9 percent this year, compared with a 17 percent gain for Coca-Cola.

Nooyi, who succeeded Steve Reinemund as CEO on Oct. 1, has said she intends to spend about $500 million a year on niche acquisitions such as Izze and Stacy's.

PepsiCo's sales have risen an average of 5 percent over the past five years on demand for noncarbonated beverages such as Gatorade and Tropicana, compared with a 3 percent average increase for Coca-Cola, which depends on soda for 80 percent of its sales.

Naked Juice, founded in 1983, will gain better marketing and access to retailers from PepsiCo, said Faucher.

The company currently distributes about 6 million bottles a month nationwide to more than 10,000 supermarkets, health-food stores and other retailers in the U.S. Naked Juice costs about $3 for a 15.2-ounce bottle.

Sales of Naked Juice rose 70 percent for the 52 weeks through Nov. 5, according to scanner data from Information Resources Inc., which excludes Wal-Mart Stores Inc. and some health-food stores.

``The super-premium juice category is small, but fits in the increasing health and wellness'' focus of companies including PepsiCo, said John Sicher, editor of Beverage Digest, an industry journal.

Coca-Cola paid $186 million in cash and assumed debt for Odwalla Inc. in 2001 to enter the so-called super-premium natural-juice category. At the time, Odwalla had sales of $94 million.

Between 2002 and 2005, Odwalla's sales rose more than 50 percent, Coca-Cola spokesman Ray Crockett said, without being more specific.