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FTC Wants To Block Baby Food Merger

July 7, 2000

WASHINGTON (AP) _ The Federal Trade Commission will attempt to block H.J. Heinz Co.’s proposed $185 million acquisition of Milnot Holding Corp., owner of the Beech-Nut brand prepared baby foods, the agency said Friday.

The merger would create company that would control about a quarter of U.S- prepared baby food sales, compared to industry leader Gerber, which has 70 percent of the market.

Officials of the Pittsburgh-based Heinz Co., and St. Louis-based Milnot, have maintained the merger is needed to compete with Gerber, but FTC lawyers believes the combination could lead to reduced competition and higher prices.

``Today’s commission action seeks to ensure that families are protected from a loss of competition that may lead to significant price increases for baby food,″ said Richard G. Parker, director of the FTC’s Bureau of Competition.

The FTC planned by July 14 to ask the U.S. District Court for the District of Columbia to issue an injunction, blocking the proposed merger.

Both companies said they would fight the FTC’s decision.

``We believe the merger is in the interest of consumers because it would result in lower prices, and we intend to vigorously defend the acquisition in court,″ said Ted Smyth, head of Heinz’s corporate and government affairs.

``The fact that Gerber is such a dominant leader in the business _ there will be more competition from having the combination of Beech-Nut and Heinz together,″ said Sal Stazzone, a vice president at the privately held Milnot.

The FTC said it will contend in court that it’s already hard for new companies to break into the U.S. baby food market and there hasn’t been any significant entry for over 60 years. The agency will argue reducing the number of competitors from three to two will be anticompetitive.

Under the agreement announced in February, Heinz would also buy Milnot’s other branded and private-label businesses, which include Milnot brand evaporated and sweetened condensed canned milk and Chilli Man brand canned chili.

Shares of Heinz rose 31.3 cents to $45.50 on the New York Stock Exchange.

___

On the Net:

Federal Trade Commission:http://www.ftc.gov/

H.J. Heinz Co.:http://www.heinz.com/

Beech-Nut Nutrition Corp.: http://www.beech-nut.com/

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