Food giant Nestlé took a big step up in the frozen pizza sector yesterday, saying it had bought Kraft Foods' pizza units in the United States and Canada for $3.7 billion dollars (€2.5 billion).
Kraft said it would use the entire proceeds to improve its bid for British confectionary group Cadbury while Nestlé said it was not interested in buying up the chocolate bar maker.
The statement by Nestlé was seen as quashing rumours that the group, which said a day ago that it would bank $40 billion for selling its stakes in eyecare giant Alcon to Novartis, would use its treasure chest to bid for Cadbury.
Bank Vontobel analyst Claudia Lenz pointed out that having renounced a bid on Cadbury, Nestlé would have "enough firepower to do further acquisitions."
Buying Kraft's frozen pizza business would boost meanwhile boost the group's frozen food business in North America, said Lenz, making a point also raised by Nestlé chief Paul Bulcke.
"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," said Mr Bulcke.
"With total sales of around 3 billion Swiss francs, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category," he added.
The United States is the biggest pizza market in the world with consumer sales of about $37 billion, said Nestle in a statement.
With estimated sales of $2.1 billion in 2009, Kraft Foods was the leader in the frozen pizza category and had enjoyed double-digit growth in the US and Canada over the last four years, it added.
Brands owned by Kraft include DiGiorno, Tombstone and California Pizza Kitchen.
Analysts from Bank Wegelin viewed the purchase as a positive move.
"This pizza deal would not kill investors' appetite, as the frozen food sector is taking on an immensely important role in today's society," it said.
For Kraft chief executive officer Irene Rosenfeld, the sale would help the company "better focus our resources on priority global brands and categories".
"Nestlé is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods," Ms Rosenfeld said.
In morning trade, Nestlé shares dipped 0.20 per cent to 50.85 francs, while the overall Swiss Market Index was down 0.64 per cent.