Nestle Eyeing Champion Petfoods in a Deal for More Than $2 Billion

Nestle SA, which has come under pressure by investors to deliver growth at a faster rate, is looking to one of the most successful Canada-based consumer-products companies to help according to a just released report.

Nestle is holding negotiations to acquire a majority interest in Champion Petfoods LP at over $2 billion, reported the Wall Street Journal on Monday. The WSJ cited people who are familiar with the negotiations. Nestle, which is the maker of Perrier water and KitKat bars did not comment when one was requested.

The news arrives as Nestle battles to convince its investors the company has a long-term plan and grapples with criticism from activist investor Daniel Loeb, whose Third Point fund took a position of $3 billion in Nestle last year. Loeb released a public statement on Sunday that expressed his dissatisfaction with the efforts of Nestle and called for urgency through a new website

Loeb said that he was concerned Nestle is not able to fully appreciate the rapid shifts in consumer behavior threatening its future.

For Loeb, the correct approach is selling off the companies lower growth businesses in order to put focus on areas in which consumer tastes are shifting and have led to gains in sales.

Blue Buffalo Inc. which is a publicly traded pet food purveyor, sold this past February to General Mills the food maker for $8 billion.

At this time, Champion Petfoods seems to be a good fit for Nestle. The company is well positioned after four decades in the industry, and has increased from 12 employees to over 500 due to a successful export program where it sells products in Europe as well as other worldwide markets.

The company, which Bedford Capital, based in Toronto and the Muhlenfeld family own, makes pet food its calls biologically appropriate, which means it is as close to what animals would eat if they were out in nature.

Its Acana and Orijen products lines have steep premium prices. A bag of dry food for puppies that weighs 4.5 pounds sells for $38.00, while Blue Buffalo has the same size bag of puppy food at $19.00.

The Pro Plan of Purina was priced at $1.50 per pound in small sizes which is less than 25% of the price Orijen.

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