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Nestlé to sell U.S. candy business to Ferrero for $2.8B

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VEVEY, Switzerland — Food and beverage giant Nestlé is selling its U.S. confectionery business to Italy-based Ferrero Group for $2.8 billion (U.S.) in cash.

With the acquisition the Nestlé U.S. candy business, announced Tuesday, Ferrero will become the third-largest confectionery company in the U.S. market.

The move will add more than 20 American brands to Ferrero’s product portfolio, including chocolate such as Butterfinger, BabyRuth, 100 Grand, Raisinets, Chunky, Oh Henry!, SnoCaps, Wonka and the exclusive right to the Nestlé Crunch brand for confectionary and certain categories in the U.S., plus sugar candy such as SweeTarts, LaffyTaffy, Nerds FunDip, Pixy Stix, Gobstoppers, BottleCaps, Spree and Runts.

In the U.S. market, Ferrero is best known for Tic Tac breath mints, Ferrero Rocher pralines, Nutella hazelnut spreads, the Fannie May and Harry London chocolate brands, and the Ferrara Candy Company, which was recently acquired by a Ferrero-affiliated company and whose brands include Trolli, Brach’s and Black Forest Gummies.

“With Ferrero, we have found an exceptional home for our U.S. confectionery business, where it will thrive,” Nestlé chief executive officer Mark Schneider said in a statement. “At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition.”

Nestlé reported its 2016 U.S. confectionery sales of about $900 million, or roughly 3% of U.S. Nestlé Group sales.

Under the agreement, Ferrero will acquire Nestlé’s U.S. manufacturing facilities in Bloomington, Franklin Park and Itasca, Ill., and the confectionary-related employees. Ferrero said it will continue to operate through the offices in Glendale, Calif., and its other current locations in Illinois and New Jersey. Ferrero USA Inc. is based in Parsippany, N.J.

“We are very excited about the acquisition of Nestlé’s U.S. confectionary business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness,” commented Giovanni Ferrero, executive chairman of the Ferrero Group. “In combination with Ferrero’s existing U.S. presence, including the recently acquired Fannie May Confections Brands and the Ferrara Candy Company, we will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionary and seasonal categories, and exciting new growth opportunities in the world’s largest confectionary market. We look forward to welcoming the talented team from Nestlé to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market.”

Nestlé and Ferrero said they expect the transaction to be completed near the end of the first quarter, pending regulatory approvals and other customary closing conditions.

“Our commitment to deliver value to the North American consumers and customers will be strongly enhanced by the arrival in our portfolio of such powerful confectionery and chocolate brands,” stated Lapo Civiletti, CEO of the Ferrero Group.

Nestlé noted that the deal covers its U.S.-focused confectionery brands only and doesn’t include its Toll House baking products, which the company called a strategic growth brand. Nestlé added that it remains committed to growing its confectionery business internationally, namely its global brand Kit Kat.

The United States represents Nestlé’s largest market, with sales of $26.7 billion in 2016. The company said its products can be found in 97% of U.S. households under brands such as Purina, Nestlé Pure Life, Coffee-Mate, Gerber and Stouffer’s. The company employs 50,000 people in more than 120 locations across the U.S., including 77 factories and 10 R&D centers.