Nestle taking control of Dreyer's ice cream business in $2.4 billion deal

Monday, June 17th 2002, 12:00 am
By: News On 6

VEVEY, Switzerland (AP) _ Nestle SA is merging its U.S. ice cream business including the Haagen-Dazs brand into Dreyer's Grand Ice Cream Inc. in exchange for $2.4 billion in stock in a deal that would give the world's biggest food and beverage company a majority stake in California-based Dreyer's.

Nestle said it would receive 55 million newly issued Dreyer's shares, boosting its stake in Dreyer's to 67 percent from the current 23 percent, under terms of the deal announced Monday.

Oakland, Calif.-based Dreyer's says its flagship ice cream marketed as Dreyer's in Texas and the western United States and as Edy's in the rest of the country is the best-selling brand of packaged ice cream in the United States.

Its shares closed at $42.79 a share Friday on the Nasdaq Stock Market.

In afternoon trading Monday on the Zurich stock exchange, Nestle shares were up 0.3 percent at 363 Swiss francs ($232).

Nestle's U.S. ice cream business will be merged with the existing Dreyer's organization, which will be headed by Dreyer's chief executive and chairman T. Gary Rogers.

Dreyer's president, William F. Cronk, a longtime business partner of Rogers, will retire when the deal closes.

The combined ice cream company will be headquartered at Dreyer's current offices in Oakland. Nestle will get three additional seats on an expanded Dreyer's board of 10 people. Nestle currently has two of eight Dreyer's board seats.

The deal is subject to regulatory and shareholder approval, the companies said.

Nestle said the deal will result in cost cuts of around $170 million annually, to be completed in 2005.

The deal also contains terms that could result in Nestle taking full control of Dreyer's in 2006. Dreyer's shareholders will have an option to sell the remaining shares to Nestle for $83 a share from January 2006 to mid-May 2006.

Should Nestle fail to take full control of Dreyer's during that period, it has an option to buy the remaining Dreyer's stock for $88 a share in the first half of 2007.

``This move underscores our commitment to growing and improving our ice cream business ... in the world's highest per capita consumption market, the USA,'' said Peter Brabeck, chief executive of Nestle.

He noted that deal followed Nestle acquisitions of Germany-based ice-cream maker Schoeller Holding AG and the U.S.-based Haagen-Dazs in recent months.

Dreyer's had first-quarter sales of $292 million and a net profit of $1.3 million.

Nestle currently has a 13 percent share of the $25 billion annual global ice cream market.