Kraft's $3.7-billion sale of pizza unit to Nestle may fund Cadbury acquisition

In an apparent attempt to raise funds to sweeten its hostile bid for Cadbury, US food gaint Kraft today announced plans to sell its profitable North American pizza business to Swiss food giant Nestle for $3.7 billion.

Kraft's pizza business, which includes the DiGiorno, Tombstone and Jack's brands in the US, the Delissio brand in Canada, the licence rights to use the California Pizza Kitchen trademark, two Wisconsin-based manufacturing facilities and the right to take on the leases for the pizza depots and delivery trucks, generated 2009 net revenues of $1.6 billion.

The frozen pizza business provides a new strategic pillar to Nestlé's frozen food portfolio in the US and Canada, where Switzerland-based Nestlé, with 2008 revenue of CHF 15.68 billion has already established a leadership in prepared dishes and hand-held product categories under the Stouffer's, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets brands.

Paul Bulcke, CEO of Nestlé, said, "This frozen pizza business greatly enhances Nestlé's frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery. With total sales of around CHF 3 billion, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category."

The US is the largest pizza market in the world with consumer sales of about $37 billion. With estimated sales of $2.1 billion in 2009, Kraft Foods is the leader in the frozen pizza business and has enjoyed double-digit growth in the US and Canada over the last four years.
The business will be part of Nestlé USA.

Brad Alford, chairman and CEO of Nestlé USA said in a statement, "Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio."