ST. LOUIS (AP) _ Nestle S.A.'s $10 billion purchase of Ralston Purina Co. would create a pet food empire that dominates both the cat and dog food market, with popular brands such as Alpo, Purina, Friskies and Meow Mix.

``We were interested in continuing to grow our business,'' said Peter Brabeck-Letmathe, Nestle's CEO. ``We were strong in our wet business, the cat business. We looked at the market and saw there was a higher growth in the dry business.''

That includes premium food and treats, the segment of the industry growing fastest and Ralston's strength, said John McMillin, an analyst at Prudential Securities in New York.

Nestle, based in Switzerland, holds a 32 percent share of the U.S. cat food market, while St. Louis-based Ralston has a 26 percent share.

It's the same situation across the aisle in dog food, where Nestle is adding Ralston's 28 percent share of the dog food market to the 10 percent it already has.

``It seems like a brilliant acquisition,'' said Jack A. Nickerson, a business professor at Washington University in St. Louis. ``Instead of running two different operations, they can simply do one.''

Shares of Ralston were up $6.88, or 27 percent, to close at $31.50 on the New York Stock Exchange.

Brabeck-Letmathe said he expects the sale, which requires shareholder and regulatory approval, will close no later than the end of 2001.

The Nestle-Ralston combination could concern federal regulators, especially in the cat food business, analysts said, which might force it to sell off some smaller brands.

But Nickerson said if Ralston and Nestle can narrowly define the pet food market, regulators are likely to approve the deal.

For example, he said, they could argue there are separate markets for wet and dry dog and cat foods and that their share of any one segment will not change.

``The best thing for them to do is put forth the narrowest market definition that would be acceptable,'' Nickerson said.

Brabeck-Letmathe said he expects the deal to enhance competition in the North American pet food market.

``I think the one who is going to win is the consumer, because he will have increased choice, more innovation, and even more quality products on the market,'' Brabeck-Letmathe said.

Analysts said Nestle should have little trouble convincing shareholders to approve the deal. Nestle will pay $33.50 in cash per Ralston share, a 36 percent premium above the company's Friday closing price of $24.63 on the New York Stock Exchange.

Nestle will also assume $1.2 billion in debt, though this will be partially offset by gains of $900 million from existing financial investments, the companies said.

``Ralston shareholders have nothing to bark about,'' McMillin said. ``The price is a good one. Ralston shareholders are being rewarded better than a pampered pet.''

Nestle will retain a presence in St. Louis, merging its Friskies pet food business in the U.S. with Ralston to form Nestle Purina Pet Care, the merged companies' North American operation. Ralston president Patrick McGinnis will head the unit.

Nationwide, dog-food sales grew by about 4 percent last year, while cat food volume grew by roughly 5 percent.

Officials of both companies said the deal should help Ralston's Purina products in Europe. Last year, Ralston sales were $2.25 billion in the U.S., but just $450 million internationally.

``It gives Ralston an important advantage in distribution in Europe,'' Nickerson said. ``I think there are huge expansion opportunities through the merger.''

The Nestle Group's current pet food business has annual sales of about $3.7 billion.

Nestle said it expected to make annual savings of $260 million by 2003, partially through job reductions through normal attrition, reduced hiring and voluntary separation packages.

McGinnis, however, said there are no specific job cuts the merger itself will trigger.

Ralston markets dry pet food under a number of different names, including Purina, Pro Plan and Meow Mix, and also makes cat and dog litter.

Nestle, the world's largest food company, produces everything from candy bars to Perrier spring water and Nescafe instant coffee.

Nestle has enlarged its pet food business through acquisitions. In 1985, the company purchased Carnation, which owned Friskies, and in 1994 it added the Alpo brand to its holdings. The company picked up one-fifth of Europe's pet-food market in 1998, when it paid more than $1 billion for Britain's Spillers Pet Food, a subsidiary of Dalgety.

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On the Net:

http://www.nestle.com

http://www.purina.com