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Nestle merger-anirban-11074


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  • 1. Nestlé Acquisition of GerberBy:-Anirban Mazumdar - 11074Ankit Chouskey -11075
  • 2. Table of Contents Nestlé Background Gerber Background Novartis Background Past Acquisitions The Deal Effects of Acquisition Future Expectations
  • 3. Nestlé Background Founder of Nestlé  Henri Nestlé A Swiss Company Three different nutrition divisions  Healthcare Nutrition, infant nutrition, and performance nutrition Largest manufacturer of infant nutritional products
  • 4. Gerber Background  Founders of Gerber  Daniel Gerber and Dorothy Gerber  Largest seller of baby food in U.S.  In 2000, Gerber began selling a line of powders, oils and other toiletries for children  In 2002 it launched microwaveable meals for older toddlers  Has a life insurance unit
  • 5. Novartis Background A Swiss Company Pharmaceutical manufacturer Looking to sell Gerber to streamline portfolio and focus on health care
  • 6. Past Acquisitions Bought Jenny Craig for $600 million Bought medical nutrition division from Novartis for $2.5 billion
  • 7. The Deal In 1994, tried to acquire Gerber, but lost to Sandoz Nestlé acquired Gerber for $5.5 billion (€4bn) on April 12, 2007 Nestlé now holds the largest share of the global baby food market
  • 8. The Effects of the Acquisition Before the Gerber acquisition, Nestlé had no presence in the U.S. Gerber has 81% of the canned baby food market
  • 9. Top Baby Food Makers 90% 80% 70% 60% 50% 40% Market Share (%) 30% 20% 10% 0% Gerber Beech- Del Other Nut Monte Corp. Foods Source: Grocery Headquarters, p.30
  • 10. Future Expectations Trying to expand the brand name of Gerber to European countries  Proven to have been successful in this area Cost synergies of $95 million by 2011 Gerber expected to generate sales of $1.95 billion  Expected to grow at 8.5% annually
  • 11. Future Results Shares in Nestle shares were up 0.1%, at 490 Swiss francs ($402.10), in Zurich trading, while Novartis was flat at 67.10 Swiss francs ($55.06). Pharmaceutical manufacturer said its divestment of the unit was part of a strategy to streamline its portfolio so that it could focus entirely on healthcare. Sales at the group rose to CHF98.5bn (€60.5bn) while organic growth was 6.2 per cent and net profit was up 13.8 per cent to CHF9.2bn (€5.6bn).
  • 12. What the CEO of Nestlé had to say "The acquisition of Gerber is the perfect complementary fit. It not only gives Nestlé the leadership position in baby food, but it also constitutes a decisive step to establish Nestlé Nutrition as the undisputed global leader in the nutrition field. This is a major step in the transformational journey of Nestlé toward a Nutrition, Health and Wellness Company. It is my great pleasure to welcome the employees of Gerber to the Nestlé Group." - Peter Brabeck-Letmathe, CEO of Nestlé
  • 13. Calculate the Value of NestléThe expected cash flow at the end of the year is $11.5 billion(FCF1). Assuming a growth rate of 8.5% for the next twoyears, the cash flows are $12.5 billion (FCF2) and $13.5billion (FCF3), respectively. Then assume that the futurecash flows will grow at a constant growth rate of 5% for thefourth year and beyond. Use a 10% cost of capital. Find thepresent value of the future cash flows. 3 quarters:- $11.5 billion / (1+.1)^1 = $10.45 billion $12.5 billion / (1+.1)^2 = $10.33 billion $13.5 billion / (1+.1)^3 = $10.14 billion [[$13.5 billion x (1.05)] / (.1-.05)] x (1/1.1)^3 = $213.00 billion Total:- $10.45 + $10.33 + $10.14 + $213.00 =$243.92 billion