NEW YORK • Nestlé SA agreed to sell Gerber Life Insurance Co unit to closely held Western & Southern Financial Group for US$1.55 billion (RM6.42 billion) in cash as the world’s largest food company focuses on businesses like coffee, bottled water and pet care.
“This move is part of the ongoing evolution of our portfolio,” Nestlé CEO Mark Schneider said on Monday in a statement. “It will allow us to invest further in our core food and beverage business and in consumer healthcare.”
Gerber Life had sales of US$856 million (RM3.55 billion) last year, and statutory capital and surplus of about US$285 million as of June 30, Nestlé said. While the transaction doesn’t include Nestlé’s Gerber products business, which houses the baby food and baby-care products, the Ohio-based buyer will market life policies under the Gerber brand.
“This is a good deal for Nestlé as it sells a noncore business for a decent price,” Alain Oberhuber, an analyst at MainFirst Bank AG, wrote in a note. He added that market expectations called for about US$1 billion.
Nestlé, which has been under pressure from activist investor Dan Loeb, is exiting the insurance business because it’s not core to the consumer operations, CFO Francois- Xavier Roger said in a February conference call. Insurance operations tend to be capital- intensive and require significant regulatory supervision. Gerber, acquired in 2007 from Swiss drugmaker Novartis AG, is mostly a book of policies for children.
The deal is expected to be completed in late 2018 or early 2019, according to the statement.