Nestle sells US confectionery business to Ferrero in $2.8bn cash deal

Nestle has agreed to sell its US confectionery business to Italian group Ferrero for $2.8bn in cash.

The Swiss multinational said in a statement that the deal was expected to close by the end of the first quarter of 2018, subject to approval from the competition authorities.

Despite already being the largest food company in the world, Nestle justified the sale by pointing to its weak position in the US chocolates space.

Nestle also said the divestment reflected its intention to reduce its sales of chocolate products in order to focus instead on nutrition, health and well-being.

The US chocolate business being sold to Ferrero generated sales of $900m in 2016 or 3% of the group's total revenues in the country.

The acquisition encompassed more than 20 US brands, including iconic sweets like ‘Butterfinger’, ‘BabyRuth’, ‘100Grand’, ‘Raisinets’, ‘Wonka’ and ‘Crunch’.

As part of the transaction, Nestle was also selling its US plants located in Bloomington, Franklin Park and Itasca.

Following the purchase, Ferrero would become the third biggest player in the US confectionery industry, already being a seller of sweets like ‘Tic Tac’, Ferrero Rocher and the popular hazelnut and chocolate spread Nutella, among others.

Ferrero’s CEO, Giovanni Ferrero said he was excited about the purchase given the iconic brands involved, with their rich history and great growth prospects.

"In combination with the actual presence of Ferrero in the US [...] we will now have a much larger scale, a wider offer in high quality products for clients through chocolate snacks, sweets and season categories as well as new and exciting opportunities of growth in the biggest sweet market in the world," he said.