M & A

Ferrero targeting Nestlé’s confectionery

According to reports, the Italian confectionery giant seeks to expand in the USA market. This would be the biggest takeover in its history, worth 3 billion dollars

Ferrero, the historic Italian confectionery group, is attempting the biggest takeover in its history worth 3 billion dollars. The company based in Alba, Piedmont, the third in the world of chocolate, has the sweet snack division of the biggest food multinational in the world in its sights, according to reports. For Ferrero, led by Giovanni Ferrero (in the picture), this would be an unprecedented attack on the lucrative USA market. To do it, it would have to look for a big target: the confectionery division of Nestlé which the Swiss food company has placed the “For Sale” sign on. The division includes products such as Butterfinger and BabyRuth. It generated about 900 million dollars turnover in 2016. For Ferrero, it could be a big opportunity for growth in the USA.

A great potential

According to rumors reported by the news agency Dealreporter, Ferrero has hired an investment bank to study the dossier. Ferrero has already expanded in the US market with the purchase of Fannie May Confections Brands, a producer of quality chocolate, for 115 million dollars in cash. On its part Nestlé announced on June 15th that it was exploring strategic options for its USA confectionery division, including a potential sale. We do not comment on speculation, was the response from Alba. However, this would be Ferrero’s second acquisition in 2017, and the second in the US. A sort of revolution for Ferrero, where for decades the philosophy of founder Michele was “No finance, no acquisitions”, a line that the company had remained faithful too until Ferrero bought Britain’s Thorntons two years ago.

The way for internationalization

Ferrero launched in the USA in 1969 with TicTac sweets, and today it has about 225 employees in the country, which represents the fifth market for the Italian group. This time Ferrero could benefit from Nestlé’s move: the Swiss multinational in the United States has put its “sweet confectionery” division up for sale. In Italy in 2015 it lost 15 million dollars and now it wants to halve its employees in Perugina, another historic Italian brand. This year has started with the internationalization trend: beyond the USA, the company has also expanded in Asia. After the opening of a production plant in China in 2015, an innovation center has been launched in Singapore. This is the second research pole for the group after that of the central office in Alba. The Asian market, along with the U.S., is one of the most interesting in terms of prospects. The Italian company saw its overall turnover grow 8.2% in the last fiscal year. An exceptional year, was how they defined it in Alba: consolidated net profit came close to 800 million dollars, up 54%.