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Nestle Buys Novartis`s Hospital Food Unit

The World`s largest Food and Beverage group, Nestle SA, purchased a unit of the Swiss drug manufacturer Novartis for $2.52 billion. The two companies announced Thursday. Following the announcement Novartis shares gained 0.5% and Nestle`s shares gained 0.8%. The purchase started a wave of speculation on Nestle`s plans to become the world`s largest supplier of hospital food for patient with special nutritional needs, a fast growing business sector. Nestle is a market leader in many product lines, including milk, chocolate, confectionery, bottled water, coffee and pet foods.

Novartis said it would use the money generated by the deal to strengthen the company`s financial stance and to improve the company`s strategic elasticity. Novartis said the deal did not include the company`s baby food business unit, Gerber. Nestle said it doesn`t expect the purchase to effect the company`s short term profits.

Nestle recently purchased the American food manufacturer Jenny Craig for $600 million. Jenny Craig manufactures and supplies a variety of dietary products and services such as weight-watch programs in the United States, Canada, Australia and New Zealand. Many analysts agree that the deal will benefit Nestle greatly although the fact that Gerber wasn`t purchased as well came as a surprise, leading many analysts to anticipate a second deal between the companies in the near future. Novartis is currently active in about 40 countries and employs 2,000 employees. Annalists expect it to yield $950 million in sales, and have an operating income of $90 million.