Nestlé is in talks to merge its international ice cream business with R&R Ice Cream in a €3 billion deal, according to a source familiar with the matter, as the world’s biggest packaged food firm focuses more closely on its higher-performing brands.

The transaction is expected to result in a 50/50 joint venture with R&R, which is owned by French private equity firm PAI, the source said yesterday, noting it could be announced as early as this week.

The venture would include Nestlé’s global ice cream operations outside of Israel and the US.

Credit Suisse is advising Nestlé, while PAI is being advised by Rothschild, said the source.

Nestlé and Credit Suisse declined to comment. R&R, PAI and Rothschild did not immediately respond to requests for comment.

A deal is not certain, but if the venture goes ahead, the plan is for PAI to exit in a few years’ time and for Nestlé to list the business, said the source, who declined to be named as the matter is private.

R&R’s ice cream brands range from Cadbury Flake Cones to Rowntree’s Fruit Pastille lollies to Kelly’s Cornish ice cream. PAI purchased R&R in 2013 from Oaktree Capital Management for around €850 million.

Private equity firms typically aim to own businesses for four to six years.

The Swiss-based giant’s ice cream business provides about $4 billion of its roughly $94 billion in annual revenue, and includes its own brand Nestlé and Movenpick.

Nestlé’s ice cream operations in the US, the world’s largest ice cream market, include brands like Edy’s and Dryer’s, but will be excluded from the venture.

Nestlé and rival Unilever control about a third of the $67bn global ice cream market, but changing tastes have increased competition and opened up the ice cream market to smaller players.

Last week Unilever agreed to buy Italian high-end ice cream maker GROM.

Nestlé oversees a sprawling portfolio including Gerber baby food, Nescafé coffee, KitKat bars and Purina pet food. But recent economic weakness around the world has clipped its overall growth rate, although its size and diversification has helped it weather the storm better than some rivals.

Still, Nestlé, like its peers Unilever and Procter & Gamble, has been reviewing its portfolio, getting rid of underperforming brands. Over the past two years it has parted with most of its Jenny Craig diet food business, Power Bar snacks, Juicy Juice drink in the US, its frozen food business in Spain and its ice cream business in South Africa.

UK-based R&R, Europe’s largest private-label ice cream maker, agreed to buy Nestlé’s South African ice cream business earlier this year. R&R had adjusted core earnings (Ebitda) of €158.7 million in the 12 months to end March 2015.

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