Sandoz acquires 70% of US baby food market with Gerber purchase

SANDOZ, the Swiss pharmaceutical giant, is buying Gerber Products, the US baby food company for dollars 3.7bn ( pounds 2.5bn).

The move is the latest in a flurry of re-alignments, takeovers and mergers by drug- based companies in response to growing competition worldwide.

Gerber, which has around 70 per cent of the market for baby food in the US, and is strongly placed in Central America and Mexico, made profits of dollars 127m on revenues of dollars 1.2bn last year.

The agreed deal will enable Sandoz to double its nutrition business overnight and establish it as a significant presence in the key US market. At present, Sandoz's worldwide nutrition sales are worth around dollars 1.2bn a year, but the US accounts for only a tiny proportion, about dollars 170m.

Sandoz is offering dollars 53 a share in cash for New York Stock Exchange quoted Gerber, a premium of more than 50 per cent over its closing price last Friday.

With revenues of dollars 10.3bn and dollars 1.2bn profits last year, Sandoz is one of the three biggest Swiss drug companies. A conglomerate with interests ranging from drugs, chemicals and construction to seeds and food, its nutrition arm owns brand names such as Ovaltine, Wasa and Roland crispbread and Isostar sports drinks.

Marc Moret, Sandoz's president, said Gerber was a unique company of the highest quality which would fit perfectly as a cornerstone for its business in North America and complement the group's strong nutrition business in Europe.

The deal is subject to antitrust clearance and approval by New York State insurance officials because Gerber owns Gerber Life Insurance.

Some analysts were sceptical about the immediate impact on Sandoz, saying it was paying a high price - 29 times earnings - for a group in a softening business.