Disposals expected in Nestlé/Dreyer's deal

- Last updated on GMT

Related tags: Ice cream, U.s. securities and exchange commission, Federal trade commission

Nestlé's proposed acquisition of the Dreyer's ice cream business in
the US looks to have hit a snag with the companies announcing this
week that talks with the competition authorities have been extended
and that the sale of 'certain assets' could be imposed.

The proposed acquisition of US ice cream producer Dreyer's Grand Ice Cream by Swiss food group Nestlé is likely to entail a number of disposals in order to obtain the approval of the US competition authorities, according to documents submitted by Dreyer's to the US Securities and Exchange Commission (SEC).

The acquisition of Dreyer's by Nestlé and the merger of the two companies' US ice cream operations was first announced in June last year, and the US authorities (the Federal Trade Commission) have been investigating the deal since that date.

In a submission to the SEC this week, Dreyer's said that the two companies would delay the completion of the deal until 10 March to allow the FTC to finish its probe. The deal had been expected to close by the end of 2002.

Significantly, however, the statement also hinted at the likelihood of disposals. The two companies said they were in talks with the FTC which could lead to a number of as yet unspecified conditions being imposed on the merger - "conditions which would probably include the sales of certain assets"​.

Under the terms of the deal, Nestlé will merge Dreyer's with its own US business, Nestlé Ice Cream Company (NICC) to form a company which will be one of the biggest players in the US ice cream market with a 20 per cent market share, making it a major rival for Unilever, the Anglo-Dutch group with extensive ice cream operations.

Nestlé will bring its upmarket Häagen-Dazs brand to the deal, while Dreyer's will add Dreamery and Godiva, just two of its many brands but which together accounted for $1.5 billion in sales last year alone. Dreyer's also produces the Edy's, Grand, Grand Light, Homemade, Whole Fruit Sorbet, M&M/Mars, Starbucks and Healthy Choice brands.

As yet there is no indication as to which assets are likely to be sold, but with Godiva and Häagen-Dazs both operating at the premium end of the market, the likelihood is that the FTC will oblige the company to reduce its presence in this segment.

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