Ingredients group buys Ovaltine

Related tags Novartis Switzerland

In February this year Swiss healthcare group Novartis announced its
intention to divest itself of the Health and Functional Food
(H&FF) arm of its Consumer Health sector business in order to
focus on the core pharmaceutical business. The strategy continued
this week with the company announcing the sale of its Food &
Beverage (F&B) business, owner of the celebrated Ovaltine
brand, to UK food ingredients company Associated British Foods
(ABF) for a total of €272.5 million (approximately CHF 400
million).

In February this year Swiss healthcare group Novartis announced its intention to divest itself of the Health and Functional Food (H&FF) arm of its Consumer Health sector business in order to focus on the core pharmaceutical business.

The strategy continued this week with the company announcing the sale of its Food & Beverage (F&B) business, which includes the celebrated Ovaltine brand, to UK food ingredients company Associated British Foods (ABF) for a total of €272.5 million (approximately SF400 million).

Under the proposed deal, ABF, based in London, will acquire the F&B business and brand ownership worldwide, with the exception of the US and Puerto Rico. The transaction is subject to regulatory approvals.

The announcement contradicts industry rumours in May 2002 that Swiss food giant Nestle was interested in purchasing the Ovaltine brand.

Paul Choffat, CEO of Novartis Consumer Health, said: "We believe that the new owner of Ovaltine/Ovomaltine, Caotina and Lacovo has the relevant geographic reach, distribution presence, and marketing expertise in the consumer industry to exploit the brands' potential.

The F&B brands will be key businesses for ABF and we expect that they will receive the necessary resources for future growth. A key element in our selection of ABF as the future owner was the commitment to maximise job transfers and employment continuation globally and especially in Switzerland, where the company has no overlapping activities."

This latest move follows an agreement with the Quaker Oats company in March 2002 to dissolve the Altus Food Company, a joint venture formed in January of 2000.

In a statement on Tuesday Peter Jackson, chief executive of ABF stressed the benefits of the purchase for the ingredients company. "Ovaltine with its strong international position and first rate management will provide an excellent growth investment for ABF.

"Alongside Twinings it will create an even stronger international business with an improved capacity for growth, both organically and through further acquisition,"​ he said.

Ovaltine, or Ovomaltine outside the UK, is a large, growing international brand with leading market positions in Europe and Asia. The malt based products, available as a powder, ready-to-drink beverage, confectionery or snack bar, claim to provide sustained energy and nutritional benefits that are particularly appealing to mothers, young children and teenagers. The two companies report that for the last two years, on average, sales have grown by 4 per cent a year, with sales evenly split between Europe and the rest of the world.

Manufacturing facilities included in the acquisition are in Switzerland, Thailand, the Philippines, China and Australia.

Novartis​ is set to continue the divestment of the H&FF business, expected to be completed by February 2003. Since February 2002 the Consumer Health sector has been aligned into six global businesses: OTC (over-the-counter medicines), Infant and Baby (including Gerber), CIBA Vision, Animal Health, Medical Nutrition, and until divestment Health and Functional Food. In 2001, the group's businesses achieved sales of SF32.0 billion and a net income of SF7.0 billion.

Associated British Foods​ is an international food, ingredients and retail group with annual sales of £4.4 billion and 34,000 employees.

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