LONDON/MILAN (Reuters) - Swiss food group Nestle (NESN.S) has agreed to sell its U.S. confectionery business to Italy’s Ferrero for $2.8 billion, it said on Tuesday, marking CEO Mark Schneider’s first big sale and a small step on its path towards healthier products.

Nestle, the world’s biggest packaged-food company, has cited the unit’s weak position in the United States, where it trails Hershey (HSY.N), Mars Inc and Lindt, as the rationale for a sale.

For family-owned Ferrero, the cash deal offers a chance for the Italian company to build scale quickly in that key market, where it has done two other deals in the past year.

The maker of Nutella spread and Ferrero Rocher pralines will become the third-largest chocolate company in the U.S. and globally, according to Euromonitor International.

For Nestle, which first sold milk chocolate in the 1880s, a consumer shift away from junk and sugary foods has led the Swiss company to focus on “nutrition, health and wellness”, although it says it is committed to its non-U.S. confectionery business.

However, bankers and analysts have speculated that it could dispose of other weak brands, or even step away from candy altogether by forming a joint venture as it recently did in ice cream. Hershey, which owns Nestle’s KitKat brand in the United States, would be the obvious partner, one banker said.

Tuesday’s deal only accounts for about 1 percent of Nestle’s sales, but is part of a larger shake-up by chief executive Schneider, a healthcare industry veteran one year into the job.

Schneider has been tasked with accelerating Nestle’s growth strategy in an increasingly tough environment for multinational food companies due to slowing growth and greater competition from niche, upstart brands.

Nestle’s mass-market chocolate bars, such as BabyRuth, Butterfinger and Crunch, have underperformed rivals for years as consumers have turned towards healthier snacks such as fruit bars and premium chocolate brands such as Lindt (LISN.S).

Nestle candy products are displayed during the company's news conference in New York October 22, 2010. REUTERS/Brendan McDermid

Nestle said last week it was selling Australian chocolate bar Violet Crumble. The company is expanding into consumer health, bidding for the vitamin and supplements business being sold by Germany’s Merck (MRCG.DE) after agreeing last month to buy vitamin maker Atrium Innovations.

“The switch of assets makes a lot of sense,” Vontobel analyst Jean-Philippe Bertschy said of the moves out of U.S. chocolate and into vitamins. “You’re going out of a weak business in terms of financials and ... entering a market with strong growth and higher margins.

Nestle paid $2.3 billion for Atrium, which has about $700 million in annual sales. The chocolate business, which it is selling for $2.8 billion, has about $900 million in sales.

Liberum analyst Robert Waldschmidt estimates the deal represents a multiple of roughly 20.7 times earnings before interest, tax, depreciation and amortization, which he said “feels like quite a top multiple”.

Waldschmidt pointed to the recent sale of Reckitt Benckiser’s (RB.L) food business, which is higher margin, at 20.3 times EBITDA.

Third Point, the U.S.-based hedge fund that has pushed Nestle to boost returns, was not immediately available to comment.

CHOCOLATE WOES

The United States accounts for nearly 19 percent of a global chocolate market worth $102.3 billion at retail, according to Euromonitor. The value of the market has been buoyed by people increasingly choosing more expensive treats, but volume has been weighed down by the popularity of other alternatives.

Nestle has lost market share in recent years, as start-up brands like Kind have grown quickly.

FILE PHOTO: The Nestle logo is pictured on the company headquarters entrance building in Vevey, Switzerland February 18, 2016. REUTERS/Pierre Albouy/File Photo

Even Lindt, whose Lindor chocolate balls command premium prices, has felt the pain, reporting on Tuesday that 2017 organic sales rose only 3.7 percent, below its long-term target of 6 to 8 percent. Sales in North America fell 1.6 percent.

Ferrero was advised by Credit Suisse and Lazard while Davis Polk and Wardwell acted as its legal adviser.</s>Nestlé has agreed to sell its U.S. confectionery business to Ferrero for $2.8 billion in cash. The move comes after the company said it was exploring strategic options for the business. Nestlé’s 2016 U.S. confectionery sales reached about $900 million. The transaction is expected to close around the end of the first quarter of 2018 following the completion of customary approvals and closing conditions.

“With Ferrero we have found an exceptional home for our U.S. confectionery business where it will thrive,” says Nestlé CEO Mark Schneider. “At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition.”

Nestlé’s U.S. confectionery business represents about three percent of U.S. Nestlé Group sales. It includes chocolate brands such as Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky, OhHenry! and SnoCaps, as well as sugar brands such as SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts.

The transaction covers the U.S.-focused confectionery brands only and does not include Nestlé’s Toll House baking products, a strategic growth brand which the company says it will continue to develop. Nestlé adds that it remains fully committed to growing its leading international confectionery activities around the world, particularly its global brand KitKat.

With sales of around $27 billion in 2016, the U.S. is Nestlé’s largest market. Its products can be found in 97 percent of U.S. households under brands such as Purina, Nestlé Pure Life, Coffee-Mate, Gerber and Stouffer’s. The company employs 50,000 people in more than 120 locations across the U.S., including 77 factories and 10 R&D centers.</s>Nestlé S.A. / Nestlé agrees to sell U.S. confectionery business to Ferrero . Processed and transmitted by Nasdaq Corporate Solutions. The issuer is solely responsible for the content of this announcement.

Nestlé today announced that it agreed to sell its confectionery business to Ferrero for 2.8 billion in cash. Nestlé's 2016 confectionery sales reached about 900 million. The transaction is expected to close around the end of the first quarter of 2018 following the completion of customary approvals and closing conditions.

Nestlé Mark Schneider commented: "With Ferrero we have found an exceptional home for our confectionery business where it will thrive. At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition."

The transaction covers the -focused confectionery brands only and does not include Nestlé's iconic Toll House baking products, a strategic growth brand which the company will continue to develop. Nestlé remains fully committed to growing its leading international confectionery activities around the world, particularly its global brand KitKat.

With sales of 26.7 billion in 2016, the is Nestlé's largest market. Nestlé products can be found in 97 percent of households under brands such as Purina, Nestlé Pure Life, Coffee-Mate, Gerber and Stouffer's. The company employs 50,000 people in more than 120 locations across the , including 77 factories and 10 centers.</s>Nestlé S.A. - Nestlé agrees to sell U.S. confectionery business to Ferrero

Nestlé S.A. / Nestlé agrees to sell U.S. confectionery business to Ferrero . Processed and transmitted by Nasdaq Corporate Solutions. The issuer is solely responsible for the content of this announcement.This press release is also available in Français (pdf) and Deutsch (pdf).............Vevey, 16 January 2018Nestlé agrees to sell U.S. confectionery business to Ferrero Nestlé today announced that it agreed to sell its U.S. confectionery business to Ferrero for CHF 2.8 billion in cash. Nestlé's 2016 U.S. confectionery sales reached about CHF 900 million. The transaction is expected to close around the end of the first quarter of 2018 following the completion of customary approvals and closing conditions.Nestlé CEO Mark Schneider commented: "With Ferrero we have found an exceptional home for our U.S. confectionery business where it will thrive. At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition."Nestlé's U.S. confectionery business represents about three percent of U.S. Nestlé Group sales. It includes popular local chocolate brands such as Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky, OhHenry! and SnoCaps, as well as local sugar brands such as SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts.The transaction covers the U.S.-focused confectionery brands only and does not include Nestlé's iconic Toll House baking products, a strategic growth brand which the company will continue to develop. Nestlé remains fully committed to growing its leading international confectionery activities around the world, particularly its global brand KitKat.With sales of CHF 26.7 billion in 2016, the U.S. is Nestlé's largest market. Nestlé products can be found in 97 percent of U.S. households under brands such as Purina, Nestlé Pure Life, Coffee-Mate, Gerber and Stouffer's. The company employs 50,000 people in more than 120 locations across the U.S., including 77 factories and 10 R&D centers.Contacts:Media: Robin Tickle Tel.: +41 21 924 22 00 Investors: Steffen Kindler Tel.: +41 21 924 35 09This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.Source: Nestlé S.A. via Globenewswire --- End of Message --- Nestlé S.A.Avenue Nestlé 55 Vevey SwitzerlandWKN: 887208;ISIN: CH0038863350;</s>* PRESS RELEASE - NESTLÉ AGREES TO SELL U.S. CONFECTIONERY BUSINESS TO FERRERO

* ANNOUNCED THAT IT AGREED TO SELL ITS U.S. CONFECTIONERY BUSINESS TO FERRERO FOR USD 2.8 BILLION IN CASH

* TRANSACTION COVERS U.S.-FOCUSED CONFECTIONERY BRANDS ONLY AND DOES NOT INCLUDE NESTLÉ‘S TOLL HOUSE BAKING PRODUCTS

* NESTLÉ‘S U.S. CONFECTIONERY BUSINESS REPRESENTS ABOUT THREE PERCENT OF U.S. NESTLÉ GROUP SALES

* SAYS “MOVE ALLOWS NESTLÉ TO INVEST AND INNOVATE ACROSS A RANGE OF CATEGORIES WHERE WE SEE STRONG FUTURE GROWTH” Source text for Eikon: Further company coverage:</s>Confirming last week's reports of an impending deal, Nestlé has agreed to sell its U.S. confectionery business to Ferrero for $2.8 billion in cash. The transaction is expected to close around the end of the first quarter of 2018, upon the completion of customary approvals and closing conditions.

The transaction will make Alba, Italy-based Ferrero the third-largest confectionery company in the U.S. market, where its best-known brands include Tic Tac breath mints, Ferrero Rocher pralines and Nutella hazelnut spreads.

“We are very excited about the acquisition of Nestlé’s U.S. confectionery business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness,” said Ferrero Group Executive Chairman Giovanni Ferrero. “In combination with Ferrero’s existing U.S. presence, including the recently acquired Fannie May Confections Brands and the Ferrara Candy Co., we will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionery and seasonal categories, and exciting new growth opportunities in the world’s largest confectionery market. We look forward to welcoming the talented team from Nestlé to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market.” “Our commitment to deliver value to the North American consumers and customers will be strongly enhanced by the arrival in our portfolio of such powerful confectionery and chocolate brands,” added Ferrero Group CEO Lapo Civiletti. “With Ferrero, we have found an exceptional home for our U.S. confectionery business where it will thrive,” said Mark Schneider, CEO of Vevey, Switzerland-based Nestlé. “At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition.”

The company’s U.S. confectionery business accounts for about 3 percent of U.S. Nestlé Group sales. Offerings include such well-known brands as Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky, OhHenry!, SnoCaps, SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts.

The transaction covers U.S. confectionery brands only and excludes the iconic Toll House baking product line, a strategic growth brand that the company will continue to develop. Nestlé will continue to grow its leading international confectionery activities, especially the global KitKat brand.

Also under the deal, Ferrero will acquire Nestlé’s U.S. manufacturing facilities in Bloomington, Franklin Park and Itasca, Ill., and will continue to operate through Nestlé’s Glendale, Calif., offices, as well as from its other current locations in Illinois and in New Jersey.

The United States, where Nestlé employs 50,000 people in more than 120 locations, including 77 factories and 10 R&D centers, is Nestlé’s largest market. The company’s U.S. confectionery sales came to about $900 million in 2016.</s>Nestlé has agreed to sell its US confectionery arm, which includes Butterfinger, Crunch and BabyRuth, to Ferrero for $2.8 billion.

Nestlé’s U.S. confectionery business represents about 3% of U.S. Nestlé Group sales. In 2016, Nestlé’s confection sales reached approximately $900 million.

“With Ferrero we have found an exceptional home for our U.S. confectionery business where it will thrive,” said Nestlé CEO Mark Schneider.

“At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition.”

The deal covers the US-focused confectionery brands only and does not include Nestlé’s Toll House baking products, a strategic growth brand which the company will continue to develop.</s>Ferrero International SA, the Italian confectionery maker, muscled further into the North America market, agreeing to pay 2.8 billion Swiss Francs ($2.9 billion) in cash to buy Nestlé SA's U.S. chocolate business that includes the Butterfinger and BabyRuth brands.

Ferrero beat out Hershey Co. as Nestlé, based in Switzerland, carried out a monthslong sales process that also drew interest from several private-equity firms.

Adding the Nestlé business, which had about $900 million in sales in 2016, will make family-owned Ferrero the third-biggest chocolate seller in the U.S. It is Ferrero's third sweets acquisition in the country in less than a year as the Italian firm bets billions of dollars on an industry that many companies are turning away from in the wake of a slowdown.

Candy is struggling to compete with healthier snacks like nuts and granola bars, losing shopper dollars and shelf space. While Hershey bid down to the wire with Ferrero for the Nestlé assets, the U.S. company is also diversifying beyond sweets, as is its biggest domestic competitor Mars Inc.

Last year, M&M's maker Mars, the world's largest maker of pet food, purchased a veterinary clinic and dog day-care operator VCA Inc. for $7.7 billion. It also bought a minority stake in KIND LLC, which makes fruit-and-nut bars. For its part, Hershey said last month it would buy SkinnyPop popcorn owner Amplify Snack Brands Inc. in its largest-ever deal valued at $1.6 billion.

But industry analysts say Americans' sweet tooth can still generate growth with investments in innovation and marketing. That is what Ferrero will be counting on. The company has a strong record of innovating and recently released Tic Tac gum, a twist on a mint that has been around for decades.

Ferrero, founded in the small northern Italian town of Alba, is already the world's No. 4 confectionery by market share and had about $12 billion in revenue in 2016.

The acquisition comes on the heels of Ferrero's purchase last year of Ferrara Candy Co., maker of Lemonheads for about $1.3 billion, and the much smaller Fannie May Confections. Ferrero's new strategy of pursuing acquisition-led growth, especially in the U.S., has been spearheaded by Executive Chairman Giovanni Ferrero, the founder's grandson who in 2011 took sole charge of the maker of Nutella spread and Ferrero Rocher chocolates.

In addition to the acquisitions, Mr. Ferrero has sought to promote organic growth with new products, including the recently introduced cookie version of its Kinder Surprise egg that is sold in Europe, but not in the U.S.

Vevey-based Nestlé, which has long tried to position itself as a health-food company, has faced criticism from investors lately for lack of focus, with a brand portfolio ranging from vitamins and bottled water to pizza and ice cream.

Nestlé, which gets only about 3% of its U.S. sales from sweets, insists it is committed to confectionery outside the U.S., although the business isn't among CEO Mark Schneider's major priorities. Globally, over 80% of Nestlé's confectionery business is made up of local brands, a model that differs from many of Nestlé's other big businesses. Nestlé has been launching more high-end chocolate, hoping to chase sales growth as overall chocolate volumes decline. Performance so far has stayed sluggish.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and Annie Gasparro at annie.gasparro@wsj.com</s>Nestlé said on Tuesday it has agreed to sell its US candy business to Italy's Ferrero for CHF 2.7 billion ($2.8 billion/2.3 billion euros) in cash as the Swiss food giant shakes up its product portfolio.

Ferrero, known for its Tic Tac, Nutella and Ferrero Rocher brands but which has traditionally preferred organic growth to acquisitions, will now be picking up Crunch, Butterfinger and Baby Ruth from Nestlé.

The sale will make Ferrero the third-largest confectionary company in the US market.

According to media reports, Ferrero competed with major chocolate manufacturer Hershey and private funds, including Rhone Capital, to secure the deal.

Executive chairman Giovanni Ferrero said that after the acquisition the Ferrero Group "will have substantially greater scale, a broader offering of high-quality products to customers..." in the United States, the world's largest confectionary market.

Nestlé's chief executive Mark Schneider said the deal "allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition.

Nestlé has begun to reposition itself since Schneider, who previously headed up German healthcare group Fresenius, took over the reins of the Swiss firm at the start of last year.

It has snapped up companies that make vegetarian meals, vitamins and luxury coffee.

Its US candy business registered sales of some 900 million Swiss francs in 2016, in a market worth an overall $8 billion, according to Ibis World.

The figure only represented around three percent of its overall US sales, Nestlé said.

The company added it remains fully committed to growing its leading international confectionery activities around the world, particularly its global brand KitKat.

The family-run Ferrero businesses has 22 production sites and 30,000 employees.

In ten years the company has more than doubled its turnover, to more than ten billion euros.

Since 2014 it has acquired the Turkish group Oltan, specializing in hazelnuts, and the British chocolatier Thornton's before starting its offensive in the US.

The deal is expected to be finalized by the end of March, Nestlé added.</s>Chocolate-maker Ferrero has announced it is to buy the US confectionery business of Nestlé.

The Ferrero Group will pay US$2.8bn (€2.28bn) in cash.

Nestlé's US confectionary business generated sales of around US$900m (€733.6m) in 2016.

As part of the sale, Italian-based Ferrero will acquire more than 20 American brands including Butterfinger, Wonka and Crunch.

The sale will see Ferrero become the third-largest confectionary company in the US market.

The company will also acquire several US manufacturing facilities of Nestlé's in Illinois, California and New Jersey.

Ferrero already has a US presence, with brands such as Tic Tac, Ferrero Rocher and Nutella already sold there.

Giovanni Ferrero, executive chairman of the Ferrero Group, said: "We are very excited about the acquisition of Nestlé's US confectionary business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness.

"In combination with Ferrero’s existing US presence, including the recently acquired Fannie May Confections Brands and the Ferrara Candy Company, we will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionary and seasonal categories, and exciting new growth opportunities in the world’s largest confectionary market.

"We look forward to welcoming the talented team from Nestlé to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market."

The sale is subject to conditions and regulatory approvals.

It is is expected to be completed around the end of the first quarter of 2018.
In a strategy claimed as "towards healthier products", Nestlé sells its United States confectionery business, number 4 on the market, to Ferrero SpA for $2.8 billion.