NORTHFIELD, IL -- Kraft Foods has announced an agreement under which it will sell its North American pizza business to Nestlé (Vevey, Switzerland) for a total consideration of $3.7 billion. The transaction is subject to regulatory clearance and other customary conditions.
The sale includes the Tombstone, Jack's and DiGiorno brands in the United States, the Delissio brand in Canada and a license for the California Pizza Kitchen trademark. Also included are two Wisconsin manufacturing facilities in Medford and Little Chute, and the right to take on the leases for the pizza depots and delivery trucks.
Kraft Foods estimates that some 3,400 employees will transfer with the pizza operations to Nestlé, as they become part of Nestlé USA. The pizza business generated 2009 net revenue in the vicinity of $1.6 billion, according to Kraft.
Nestlé is a major player in the North American frozen food market through such brands as Stouffer's, Buitoni, Lean Cuisine, Hot Pockets and Lean Pockets.
"The acquisition brings leadership in the frozen pizza category, where Nestlé only had a minor presence until now, and builds on Nestlé's existing pizza know-how and operations in Europe," Nestlé explained.
Nestlé chief executive Paul Bulcke explained that "This frozen pizza business greatly enhances Nestlé's frozen food activities in North America, bringing together a selection of great U.S. and Canadian brands, industry-leading research and development and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery."
With total sales of around 3 billion Swiss francs, Nestlé will become the world leader in the fast-growing frozen pizza category, Bulcke added. (A Swiss franc is worth about 98¢ U.S.).
Kraft chairman and chief executive Irene Rosenfeld observed that the transaction will be beneficial to both parties. "Selling this business now not only delivers an attractive return for our shareholders, but enables us to better focus our resources on priority global brands and categories," she noted. "Nestlé is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods."
Observers of Kraft's bid to acquire British confectionery powerhouse Cadbury pointed out that the proceeds from the sale of the pizza business might be used to increase the price offered for Cadbury stock. The iconic chocolatier's board of directors has urged shareholders not to accept Kraft's bid of 767p (about $12.48) per share, which it regards as too low, while a major Kraft shareholder, Berkshire Hathaway principal Warren Buffet, has expressed concern that issuing new stock to help finance the purchase would dilute the value of existing shares.