Nestlé in Merger Talks with R&R Group

Nestlé SA is in advanced talks with European ice-cream maker R&R Group to form a joint venture for ice cream mainly in Europe and Africa.

The world's largest packaged foods company said the proposed merger with R&R, owned by French private-equity firm PAI Partners, would help its ice cream business grow. It expects the tie-up to be implemented next year and to be chaired by Luis Cantarell, Nestlé 's executive vice president for Europe, the Middle East and North Africa.

Switzerland-headquartered Nestlé will contribute its ice cream businesses in Europe, Egypt, the Philippines, Brazil and Argentina to the new joint venture and transfer its European frozen food businesses, excluding the pizza operation.

Both companies would own an equal share of the new joint venture which would operate in more than 20 countries and employ more than 10,000 people, said Nestlé .

Nestlé holds roughly 10.8% of the global ice cream market, while R&R has 0.8% according to research firm Euromonitor. The new joint venture would help Nestlé better compete with archrival Unilever PLC, which has a 22.8% share of the global ice cream market and which last week said it had agreed to buy Italian ice cream maker Grom.

Both Nestlé and Unilever have been selling slow growing parts of their food businesses, but ice cream is seen as a growth area, with Euromonitor forecasting that the global market will rise to $107 billion by 2020, up from $71 billion currently.

Reuters, which first reported the news, put the value of the deal at €3 billion ($3.4 billion) and said that if the venture went through, PAI could sell its stake in R&R in a few years time, and that Nestlé could list the combined business.

A spokesman for Nestlé declined to comment. PAI didn't immediately respond to a request for comment.

R&R makes ice cream brands like Cadbury Flake Cones and Rowntree's Fruit Pastille lollies a R&R currently licenses Nestlé 's brands in the U.K., Ireland, Australia, New Zealand, and South Africa. In March, Nestlé agreed to sell its South African ice cream business to R&R. Nestlé owns brands like Extreme, Nestlé Schö ller and Mö venpick.

Nestlé 's ice cream business in the U.S.—which includes brands like Edy's and Dryer's—in Canada, Greater China, Thailand, Malaysia, Peru and Chile won't be included in the joint venture. Neither will its business in Israel, where it already has a joint venture with Osem Investments.

Nestlé 's milk products and ice cream business reported half-year sales of 7.19 billion Swiss francs, up 0.8% from a year earlier on an organic basis, which strips out currency movements.

Write to Saabira Chaudhuri at [e-mail]

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October 05, 2015 09:45 ET (13:45 GMT)

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