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Rowntree Agrees to $4.5 Billion Buyout From Nestle

June 23, 1988

LONDON (AP) _ Rowntree PLC on Thursday agreed to a sweetened, $4.5 billion buyout offer from Swiss foods giant Nestle SA, ending the months-long ″candy bar war″ for the British confectioner.

Nestle’s 2.55 billion-pound offer edges out rival bidder Jacobs Suchard AG, a Swiss chocolate and coffee concern, to create the world’s second-largest confectioner behind Mars Inc.

The bid for Rowntree, maker of the Kit Kat candy bar, is the largest offer for a British company by a foreign concern.

Nestle will pay 10.75 pounds a share, or $19.03, up from its initial bid of 2.1 billion pounds, or 890 pence a share. The confectioner increased its stake in Rowntree to 22 percent Thursday from a previous 15.8 percent.

Suchard, which holds a 29.9 percent stake in Rowntree, had offered 2.32 billion pounds, or 950 pence a share.

Tim Potter, an analyst with Shearson Lehman Hutton Inc. in London, noted that Nestle’s bid not only is 13 percent higher than Suchard’s offer, but Nestle ″got the board along with the agreement, which is crucial in this takeover battle. That is probably enough to win Rowntree.″

Suchard declined to comment on its plans, but Walter Anderau, the company’s vice president for corporate affairs, said, ″We are in no rush.″ But he said Suchard is ″still convinced that Rowntree would be the ideal partner for us.″

Analysts predict Suchard, which will drop from second to third place among worldwide confectioners, is likely to sell out to its rival. At the current buyout price, Suchard’s profit would amount to about 205 million pounds, Potter said.

The battle for Rowntree began April 13 when Zurich-based Suchard, maker of the triangular Toblerone chocolate bar, snapped up nearly 15 percent of Rowntree’s shares in a ″dawn raid.″ That move prompted Nestle to enter the fray with an initial offer on April 26. Suchard countered with its bid a month later.

In trading on the London Stock Exchange, Rowntree closed up 37 pence a share at 10.76 pounds a share.

Nestle said it assured Rowntree that the confectioner’s York headquarters will remain the center of the company’s activities in Britain and that the office also will serve as headquarters of Nestle’s international chocolate and confectionery ″strategy.″

In addition, Rowntree Chairman Kenneth Dixon will be retained as an executive member of the Nestle general management committee.

The assurances were an apparent attempt to fend off public criticism about the takeover.

Rowntree’s Dixon said, ″We believe that the price now offered is fair and shareholders and employees should both gain from the agreement which has been reached.″

The competing bids by the two Swiss companies sparked a controversy in Britain, where critics objected to the acquisition of the 263-year-old British company by a foreign concern and feared job losses in York, where Rowntree employs 5,300 of its 30,000 workers.

The government’s decision not to intervene in the takeover bids sparked protests and divided members of Prime Minister Margaret Thatcher’s Conservative Party.

″This is a sad but inevitable result of the government’s refusal to defend British industry against foreign predators,″ said Bryan Gould, an opposition Labor Party lawmaker.

Rowntree, which traces its origins back to a Quaker grocer’s shop in northeast England, had a pre-tax profit of 112 million pounds on sales of 1.43 billion pounds in 1987.

Nestle, based in Vevey, Switzerland, had net profit of 1.8 billion Swiss francs, or about $1.2 billion, on sales of 35.2 billion Swiss francs, or $24 billion last year.

Helmut Maucher, Nestle’s managing director, said, ″We look forward to building on the strengths of the two companies and creating a prosperous future for the combined group.″

The previous largest foreign bid for a British company was Australia-based Elders IXL’s 1986 purchase of the Courage brewing business from Hanson PLC for 1.4 billion pounds, or $2.5 billion, according to Mergers and Acquisitions magazine.