Nestle sells US Haagen-Dazs unit for US$4 bil
Swiss company expanding to challenge global ice cream leader Unilever.
ZURICH: Nestle SA is selling its US ice cream business that includes brands like Haagen-Dazs and Drumstick to a joint venture with private equity firm PAI Partners for US$4 billion.
The venture, Froneri, was created in 2016 when the Swiss company merged its European ice cream business with PAI-owned R&R.
Now it’s expanding to create a stronger challenger to Unilever, the global leader in ice cream with the Ben & Jerry’s and Magnum brands.
The move comes as Nestle Chief Executive Officer Mark Schneider divests slower-growing businesses like its US confectionery operations while focusing on pet food, water and coffee for growth.
“Nestle has been up against Unilever for years,” said Duncan Fox, an analyst at Bloomberg Intelligence.
“Having complete focus on ice cream makes it more likely for the merged brands to compete against Unilever’s global scale.”
Competition in the US ice-cream market has intensified, as upstarts like Halo Top that offer healthier options eat away at bigger players’ market share. Unilever has responded with postmodern flavours like Turmeric Chai & Cinnamon or Matcha & Fudge.
The US ice cream business being sold had sales of US$1.8 billion in 2018, while Froneri had revenue of 2.9 billion Swiss francs (US$2.9 billion), Nestle said. The deal will give Froneri a 10% global market share, compared with Unilever’s 18%, according to Bloomberg Intelligence, citing Euromonitor data.
Appetite for deals
Schneider signalled an appetite for deals at Nestle’s most recent financial update in October, after the US$10 billion sale of a dermatology unit earlier this year. The company has said it aims to complete a review of its ailing European processed-meat brand Herta by the end of the year.
The ice cream deal also follows Nestle’s decision to cut some 4,000 jobs linked to the direct delivery system of frozen pizza and ice cream to stores, and instead transition to a warehouse model to lower costs.
Nestle is “convinced that Froneri’s successful business model can be extended to the US market”, Schneider said in a statement, confirming an earlier Bloomberg report.
The venture is gaining market share, Nestle said. The Swiss company sells Haagen-Dazs in the US while General Mills Inc makes it for Europe and other markets.
Froneri has leveraged loans outstanding worth €1.8 billion, in a mix of euros, sterling and Australian dollars, according to data compiled by Bloomberg.
The company is rated Ba3 by Moody’s Investors Service and B+ by S&P Global Ratings.
Stay current - Follow FMT on WhatsApp, Google news and Telegram
It last tapped the loan market in June to fund the acquisition of New Zealand-based ice cream maker Tip Top, with Credit Suisse, Citibank and Goldman Sachs arranging that deal.