Kraft Foods will buy Groupe Danone’s global biscuit business for $7.2 billion in cash.
The acquisition will expand the biscuit and snacks portfolio that Kraft has built since its 2000 acquisition of Nabisco Foods. It also adds to Kraft’s holdings in Europe and provides a growth platform for emerging markets.
“This proposed acquisition makes great sense for Kraft,” said Kraft Chief Executive Officer Irene Rosenfeld in a statement. “It will increase our presence in snack—our fastest growing global segment—and transform our international business. This growing, high-margin business will give Kraft another core growth category in Europe, a cornerstone for faster growth in emerging markets, and the best portfolio of iconic biscuit brands in the world.”
Danone reported 2006 sales of $2.7 billion for its biscuit business. Brands involved in the sale include LU, Tuc and Prince. Kraft will buy operations in 20 countries, including 36 manufacturing plants. Danone remains in the biscuit business through joint ventures in Latin America and India.
France’s Works Council must approve the sale before Danone can enter a definitive agreement. The deal is expected to close by yearend.
Kraft plans to keep the business in its current headquarters in Paris. Georges Casala, who runs the biscuit business for Danone, will join the company after the acquisition to oversee all of its biscuit business in the European Union. He will report to Kraft International president Sanjay Khosla.
This is Kraft’s first acquisition as an independent company since it was spun off by parent company Altria Inc. in April. Kraft bought United Biscuits’ operations in Iberia in September 2006 for $1.07 billion, recouping its Nabisco brand names including Oreo, Ritz and Chips Ahoy in Europe, the Middle East and Africa.
Kraft’s total snacks business grew 5.2% to $10 billion in net revenue for 2006. The division accounted for the biggest portion, 29%, of its $34.4 billion in total net revenue worldwide.
Geographically, Kraft’s international business accounted for $11 billion in 2006 net revenue, compared to $23 billion in North America.
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