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Nestlé to acquire Kraft Foods' frozen pizza business

Posted by on Jun. 10, 2010 at 5:37 PM
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http://www.nestle.com/MediaCenter/PressReleases/AllPressReleases/Kraft+pizzas.htm

Nestlé to acquire Kraft Foods' frozen pizza business

Vevey, January 5, 2010



Nestlé has agreed to acquire Kraft Foods' frozen pizza business in the US and Canada for USD 3.7 billion in cash. The business includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio. This frozen pizza business provides a new strategic pillar to Nestlé’s frozen food portfolio in the US and Canada, where the Company has already established a leadership in prepared dishes and hand-held product categories under the Stouffer's, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets brands. The acquisition brings leadership in the frozen pizza category, where Nestlé only had a minor presence until now, and builds on Nestlé’s existing pizza know-how and operations in Europe. It is a natural fit with Nestlé’s focus on delivering convenient, premium, wholesome and nutritious frozen food for consumers around the world. The transaction is subject to US and Canadian regulatory approval and is expected to be completed in 2010.

Paul Bulcke, CEO of Nestlé, said: "This frozen pizza business greatly enhances Nestlé's frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery. With total sales of around CHF 3 billion, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category."

The US is the largest pizza market in the world with consumer sales of about USD 37 billion. With estimated sales of USD 2.1 billion in 2009, Kraft Foods is the leader in the frozen pizza category and has enjoyed double-digit growth in the US and Canada over the last four years. The DiGiorno and California Pizza Kitchen brands have driven the development of the premium segment, providing consumers and families attractive alternatives to eating out and home delivered pizzas. The business also includes other strong brands with Tombstone and Jack’s. In addition, Delissio is the leading frozen pizza brand in Canada.

The business will be part of Nestlé USA. "Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio," said Brad Alford, Chairman and CEO of Nestlé USA.

The business has an estimated 2009 EBITDA of USD 297 million or 14.2% of sales, and an estimated EBIT of USD 279 million. Synergies, estimated at 7% of sales, will be fully realized within five years. On a pre-synergy basis, the transaction is priced at 1.8 times estimated 2009 sales and 12.5 times estimated 2009 EBITDA. The acquisition will enhance Nestlé's earnings per share in the first full year of ownership. All above financial estimates are based on Nestlé's IFRS accounting standards.

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by on Jun. 10, 2010 at 5:37 PM
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Replies (1-8):
curlycupcake
by on Jun. 10, 2010 at 8:34 PM

Good grief what a machine this company is!  Thanks for sharing!

RanaAurora
by Group Owner on Jun. 10, 2010 at 8:37 PM

You're welcome.

I'm sad to lose California Pizza Kitchen.  Aah well.

JMmama
by Member on Jun. 10, 2010 at 8:38 PM

NOOOOOOO!!!!!!

Is it just the frozen CPK? Or is the restaurant out too?

RanaAurora
by Group Owner on Jun. 10, 2010 at 8:39 PM

Is there a restaurant chain?

Crap, I don't know.  This only says "Frozen."  Hmm.

JMmama
by Member on Jun. 10, 2010 at 8:43 PM

There is and it is yummy, lol. I have no idea how the frozen food industry works. If CPK sold their name, recipe, whatever to Kraft and Kraft produces and sells it, giving some of the profits back to CPK, some to Nestle, etc, then the restaurant is probably okay since their profits would just go right back into the restaurant chain. Right?

Quoting RanaAurora:

Is there a restaurant chain?

Crap, I don't know.  This only says "Frozen."  Hmm.


RanaAurora
by Group Owner on Jun. 10, 2010 at 8:47 PM

Not necessarily.  This kind of stuff is crazy complicated.  If you figure that General Mills makes TONS of stuff but Nestle only has profit from the breakfast products, you know?

JMmama
by Member on Jun. 10, 2010 at 8:52 PM
Ok, I see. But, if Nestle doesn't own CPK, just the part of Kraft that makes the frozen CPK pizza, then the restaurant would be okay since it isn't part of Kraft's frozen food division. Right? I get so confused by all of this. That's why I majored in ballet not business, lol.

Quoting RanaAurora:

Not necessarily.  This kind of stuff is crazy complicated.  If you figure that General Mills makes TONS of stuff but Nestle only has profit from the breakfast products, you know?

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RanaAurora
by Group Owner on Jun. 14, 2010 at 12:26 AM

I think so?

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