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Nestlé: Green Light for Ralston Purina Acquisition

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  • Approval of US FTC, as well as of the regulatory authorities of other countries and regions, clears way for Ralston Purina acquisition - deal to be closed by December 31, 2001
  • Integration team in place under the leadership of John Harris, Worldwide Integration Executive, reporting to Nestlé Group CEO
  • North American pet-care operations poised for smooth transition and continued growth under the management of Patrick McGinnis, current CEO of Ralston Purina
  • Peter Brabeck-Letmathe, CEO of Nestlé, stated: "The FTC approval opens the way for the creation of a new and dynamic leading pet-care company worldwide and in North America, fully dedicated to consumers and their pets. Combining Ralston Purina's and Nestlé's R&D, technology and marketing know-how ensures even more competitiveness in the world's most important pet-care market, giving Nestlé a solid base for long-term shareholder value creation."

The US Federal Trade Commission announced its approval of the Ralston Purina acquisition, proposed by Nestlé on January 16, 2001. Nestlé will now acquire Ralston Purina shares at USD 33.50 per share in cash, by the end of this year. The transaction has an enterprise value of USD 10.3 billion (USD 10.0 billion equity plus USD 1.2 billion of net debt, minus USD 0.9 billion of financial investments). This acquisition will be financed by USD denominated debt. As a result of the strength of Nestlé's balance sheet, the Group will retain its AAA rating after the completion of the transaction, the largest in Nestlé history.

In the meantime, the acquisition proposal was accepted by Ralston Purina shareholders on May 21, and approved on July 27 by the Competition Authorities of the European Union as well as the other relevant markets around the world.

Ever since it acquired the Friskies business with Carnation in 1985, Nestlé has considered pet care as a strategic growth area. Today, the Nestlé Group's pet-care business amounts to about USD 3.7 billion in sales. Ralston Purina sales, with its global Purina brand, totaled USD 2.7 billion in the year 2000, with North American sales accounting for USD 2.25 billion. The combined sales of Nestlé and Ralston Purina will make the Nestlé Group a co-leader in the pet-care industry.

Nestlé expects that combining the two companies will significantly improve operating efficiencies in all areas. Savings should reach USD 260 million and will be fully achieved by the end of 2003 and Nestlé is confident on achieving these targets. The full-time global integration executive, Mr. John Harris, who reports directly to the CEO of the Nestlé Group, will act as a catalyst for a smooth and rapid transition and integration of the new business. The North American Friskies business will be merged with the existing Ralston Purina organization. The new organization will be called "Nestlé Purina PetCare Company" and will be based in St. Louis, Missouri. It will be run by Mr. Patrick McGinnis, current President and CEO of Ralston Purina, with Mr. Joe Weller, Chairman and CEO of Nestlé USA, as Chairman. In the rest of the world the pet-care business will be integrated into existing operations wherever possible.

The two companies complement each other perfectly in terms of product categories and geographic presence. Friskies, Nestlé's brand in this sector, will rapidly complement its own strength in wet cat food with the unique expertise and strong presence of Ralston Purina in the dry dog food area. Moreover, Nestlé expects that Friskies' good market position in Europe and in other continents will allow it to quickly internationalize Ralston Purina's science-based product lines and thus to significantly expand its business in the premium sector and in specialized sales channels. Moreover, Ralston Purina's excellent performance during the first nine months of 2001, in a fiercely competitive environment, confirms Nestlé's belief that this acquisition will contribute significantly to the increase of sales and profits in the Group's pet-food sector.