Nestle to buy out food maker Osem for about 3.3b shekels

[TEL AVIV] Nestle SA agreed to buy out Osem Investments Ltd, Israel's largest publicly-traded foodmaker, for about 3.3 billion shekels (S$1.19 billion), returning to acquisitions in the industry after a series of divestments.

Nestle will pay Osem investors 82.50 shekels a share to buy the 36.3 per cent stake it doesn't already own, the Swiss company said Thursday on its website. That's 26 per cent higher than Wednesday's closing price in Tel Aviv.

Osem, which makes Cheerios breakfast cereal, hummus and a peanut-butter-flavored snack called Bamba, is Nestle's biggest food acquisition since 2012, according to data compiled by Bloomberg.

Since then, the Swiss company has made takeovers to develop a skincare unit and sold underperforming businesses such as the Jenny Craig weight-loss service and PowerBar sports snacks.

Shares of Osem jumped as much as 24 per cent, the biggest advance since Bloomberg started tracking them in January 1994. They traded at 80.75 shekels at 10:06 am in Tel Aviv. Nestle first acquired a stake in 1998.

The purchase is part of a strategy that might lead the Swiss company to buy out units in other countries to fully consolidate them, according to Alain Oberhuber, an analyst at MainFirst Bank AG.

"We'll probably see more of this happening in other countries when the timing is right, like for example in Malaysia, Nigeria or India." he said.

Osem, which was established in 1942, has been seeking to boost international operations as regulation and government efforts to lower food prices have curbed growth at home.

"One reasoning for Nestle to take the company private is that it's harder to operate in Israel due to heavy regulation in the country," Meir Slater, head of research at Bank of Jerusalem Ltd, said by phone.

"Overall though the move fits into Nestle's strategy as most of its companies are privately held."

The offer values all of Osem at 9.13 billion shekels and will be presented to the Israeli company's shareholders at an an extraordinary meeting on March 17. JP Morgan Chase & Co was the sole adviser to Nestle on the deal.

BLOOMBERG