Nestle to Acquire Kraft's Frozen Pizza Business

Kraft's hostile takeover bid to acquire Cadbury just got a HUGE lift.

Nestlé has announced it will NOT bid on Cadbury, clearing the field for Kraft. And Kraft will have $3.7bn more in its coffers for the takeover because Nestlé will buy its frozen pizza business.
Nestlé has many fine brands, and is a powerhouse in frozens thanks to its Hot Pockets, Lean Cuisine and Stouffer's lines. Kraft is the largest frozen pizza manufacturer in the U.S. with the DiGiorno, Tombstone and Jack’s and Delissio house brands, as well as the 13 year-old California Pizza Kitchen license. Kraft’s frozen pizza business had sales of $2.1bn in 2009 with a profit of $297MM. The U.S. is currently the largest pizza market in the world (sales of $37bn), but pizza is a fast-growing export trend and Nestlé is brilliant is cornering the market this way.

Paul Bulcke, Nestle CEO, 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 3bn, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category." One of the keys to the deal is defintely marrying Nestlé's R&D capabilities, including their openness to new technology through a variety of sources, with the pizza category and its ability to be extended into other platforms (e.g., pannini).

Kraft isn't out of the woods on Cadbury yet, with the U.K.-based confectionery giant resisting the hostile takeover both financially and in some nasty personal attacks on Kraft's business model and "ethics" (i.e., Kraft is American and therefore beneath contempt). And both Hershey and Ferraro have said they're considering counter-offers. The only sure thing is the likelihood of Cadbury staying independent appears to shrink daily.

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