Kraft Foods’ leading position in Canada’s frozen pizza market, through its Delissio brand, is to be sold to Nestle along with all Kraft’s other North American frozen pizza business.
The US$3.7 billion cash deal gives Nestle the Delissio operations in Canada as well as its U.S. counterpart DiGiorno, plus the Tombstone and Jack’s brands in the U.S., and two Wisconsin manufacturing plants at Medford, about 250 km east of Minneapolis, and Little Chute, near Appleton.
Kraft, whose Canadian business is headquartered in Toronto, operates 13 food processing plants and bakeries in Ontario, Quebec and British Columbia. Neither Kraft nor Nestle specified in separate releases Tuesday how this sale will affect any Canadian operations or supply agreements.
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Illinois-based Kraft said in its release that it expects about 3,400 employees will transfer with the business to Nestle, pending Canadian and U.S. competition regulators’ approval.
“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,” Kraft CEO Irene Rosenfeld said in the release. “Nestle is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods.”
Nestle’s frozen foods portfolio in North America already includes the Stouffer’s, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets brands.
“The acquisition brings leadership in the frozen pizza category, where Nestle only had a minor presence until now, and builds on Nestle’s existing pizza know-how and operations in Europe,” Switzerland-based Nestle said in a separate release.
Kraft Foods has seen “double-digit growth” in its frozen pizza sector in Canada and the U.S. in the past four years, where it had estimated sales of US$2.1 billion in 2009. Delissio, Nestle noted, is the “leading frozen pizza brand in Canada.”
The U.S. remains the world’s largest pizza market, with consumer sales of about US$37 billion, Nestle noted.
Kraft said in a separate release Tuesday that it plans to use the full proceeds from this sale to fund a partial cash alternative in its hostile takeover bid for British-based candy and confectionery giant Cadbury.
“Kraft Foods is doing this because of the desire expressed by some Cadbury securityholders to have a greater proportion of the offer in cash,” Kraft said in its release, “and because Kraft Foods shareholders have expressed a desire for Kraft Foods to be more sparing in its use of undervalued Kraft Foods shares as currency for the offer.”
According to various news reports this week, those “shareholders” include renowned U.S. investor Warren Buffett, whose Berkshire Hathaway firm owns just under 10 per cent of Kraft.
