Nestle Pays $3.7 Billion for Kraft Pizzas

Company says it's not interested in Cadbury

Nestle took a big step up in the frozen pizza sector on Jan. 5, saying it had bought Kraft Foods' pizza units in the U.S.and Canada for $3.7 billion.

Kraft said it would use the entire proceeds to improve its bid for British confectionary group Cadbury while Nestle said it was not interested in buying up the chocolate bar maker.

Buying Kraft's frozen pizza business would boost the group's frozen food business in North America, said Bank Vontobel analyst Claudia Lenz, making a point also raised by Nestle chief Paul Bulcke.

"This frozen pizza business greatly enhances Nestle's frozen food activities in North America, bringing together a selection of great U.S. and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery," said Bulcke.

"With total sales of around 3 billion (Swiss francs), Nestle will become the world leader in the attractive, fast-growing frozen pizza category," he added.

The U.S. is the biggest pizza market in the world with consumer sales of about $37 billion, Nestle said.

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 U.S. and Canada over the last four years. Brands owned by Kraft include DiGiorno, Tombstone and California Pizza Kitchen.

For Kraft chief executive officer Irene Rosenfeld, the sale would help the company "better focus our resources on priority global brands and categories."

"Nestle is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods," Rosenfeld said.

Copyright Agence France-Presse, 2010

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