Nestlé, Pet-Food Maker Talk Deal -- WSJ
03 July 2018 - 5:02PM
Dow Jones News
By Ben Dummett, Dana Mattioli and Dana Cimilluca
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 3, 2018).
Nestlé SA is angling to take control of Canada's Champion
Petfoods for more than $2 billion, according to people familiar
with the matter, as the consumer-goods giant seeks out
higher-growth businesses to help offset its struggling
packaged-foods operations.
Nestlé is in talks to acquire a majority stake in the closely
held maker of specialty cat and dog food, whose owners include
Toronto buyout firm Bedford Capital. The talks, however, could
still break down before a deal is completed.
The interest in Champion comes about a year after Nestlé first
disclosed a far-reaching plan to revive its stock price by
investing in areas such as pet care, bottled water and coffee amid
pressure from U.S. activist investor Daniel Loeb. Since then, the
company has made several deals, including its $7 billion
acquisition of the rights to sell Starbucks Corp.'s coffee and tea
in grocery and retail stores.
Still, Mr. Loeb remains dissatisfied with these efforts. On
Sunday he made public a letter to Nestlé Chief Executive Mark
Schneider and the board, criticizing the company for not selling
underperforming and nonstrategic businesses fast enough and
described the company's strategic approach as "muddled."
Switzerland-based Nestlé is already established in the pet-food
market through its well-known Purina brand, and in April it
acquired a majority stake in Tails.com, a direct-to-consumer dog
nutrition business in the U.K. for an undisclosed amount.
Nestlé's pet-care operation generated organic sales growth of 3%
last year, second only the coffee division's growth on an organic
sales basis, which excludes such factors as foreign-exchange
fluctuations. By comparison, the company's confectionery and
prepared dishes and cooking aids businesses grew by 0.3% and 2.2%
respectively.
The acquisition of Champion could help Nestlé sustain the
momentum of its pet-food operation, while providing the Edmonton,
Alberta-based company with a broader customer base.
Champion, as a closely held company, doesn't disclose financial
information. But it and other natural pet-food makers are growing
faster than their more traditional rivals as health-conscious
consumers increasingly do for their pets what they have done for
themselves by favoring natural food and high-end treats -- a trend
that has had many packaged-foods companies playing catch up.
Champion sells its dog and cat food under the Orijen, and Acana
brands, listing fresh meat, free-run poultry and wild-caught fish
among the ingredients it uses. The company sells its products in
more than 80 countries through a network of pet food distributors
and veterinarian practices, as well as in-store and online,
according to its website.
Nestlé isn't the only packaged-foods company betting on the
acquisition of higher-end pet-care businesses to reinvigorate
growth. In February, General Mills Inc. agreed to buy natural
pet-food maker Blue Buffalo Pet Products Inc. for about $8 billion
to help offset slumping sales of its yogurt and cereal brands.
And last month, Mars Inc., best known for its candy bar and gum
brands, acquired European veterinary operator AniCura Holding AB
from European buyout firm Nordic Capital for about EUR2 billion
($2.32 billion), the latest in a series of deals in the pet-care
sector for the privately held company. Mars is also a major
pet-food provider with brands such as Iams, Pedigree and Royal
Canin.
Write to Ben Dummett at ben.dummett@wsj.com, Dana Mattioli at
dana.mattioli@wsj.com and Dana Cimilluca at
dana.cimilluca@wsj.com
(END) Dow Jones Newswires
July 03, 2018 02:47 ET (06:47 GMT)
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