Nestlé to fight US decision to block ice cream deal

Nestlé IS fighting to salvage its dream of knocking Unilever off the top slot in the US ice cream market after regulators moved to block the Swiss food giant's multi-billion dollar takeover of Dreyer's.

Nestlé, which unveiled the $2.8bn deal last June, said it hoped to get round the Federal Trade Commission's opposition to the deal by offering to sell some ice cream brands. "We believe that we have a chance to close the deal in a way that gives us the position we were looking for," a group spokesman said.

Linking up with Dreyer's would give the duo a 24 per cent share of the US market, home to the world's most voracious ice cream eaters, ahead of Unilever with a 19 per cent share. It would also pit an enlarged Nestlé neck and neck with Unilever on a global basis; both would have an estimated 17 to 18 per cent share of the $30bn-a-year global market.

Just hours before the FTC voted to seek a preliminary injunction to block the merger, Nestlé and Dreyer's revealed that they had agreed to sell a number of brands to the Canadian group, Coolbrands International. It is not clear whether the FTC considered this proposal in reaching its decision.

The FTC warned that the deal would be anti-competitive, as it would leave just two players in the "superpremium" ice cream market – Nestlé/Dreyer's and Unilever. "This deal, as structured, would likely raise prices and reduce choice for consumers," Joe Simons, director of the FTC's competition bureau, said. The deal would add Dreyer's luxury Dreamery, Godiva and Starbucks ice creams to Nestlé's Häagen Dazs brands, giving it around 60 per cent of the superpremium market.

"We are quite confident that the disposals that are offered will see the way for the successful conclusion of this issue [by the middle of June]," Nestlé's spokesman added. The brands highlighted for disposal include Dreyer's Dreamery ice cream and Whole Fruit sorbet brands.

Analysts said Nestlé was likely to offer additional disposals, in order to force the deal through. Andrew Wood, at Sanford C Bernstein, said: "We feel that it is Nestlé's style to do the deal, whichever way it can, and almost at whatever cost, in order to achieve its long-term objectives of strength and leadership in ice cream in the US and globally."

Unilever, which owns Ben & Jerry's, Magnum and Cornetto, is today expected to unveil a new strategy for its ice cream business.