NSRGY Nestle SA (PK)

By Brian Blackstone 

ZURICH -- Nestle SA has entered exclusive talks to sell it skin-health business to private-equity firm EQT and the Abu Dhabi Investment Authority for 10.2 billion Swiss francs ($10.1 billion), its latest move to reshape its sprawling portfolio and revive sluggish growth.

The Swiss consumer goods giant said in September it was exploring options for the unit as part of a broader effort by Chief Executive Mark Schneider to reinvigorate Nestlé's portfolio and focus more on coffee, pet care and consumer health.

Nestle said Thursday it expected to close the sale of the skin-health business, which includes face-care products Cetaphil and Proactiv, in the second half of the year, at which point it would update investors on what it planned to do with the proceeds and its future capital structure.

The division generated net sales of 2.8 billion Swiss francs in 2018.

Analysts at Vontobel Research said the price tag was at the high end of its estimates. "In our model, we carried a price of 7 billion Swiss francs. However, we didn't rule out a price tag of up to 10 billion Swiss francs," they said,

Nestlé established its skin-health unit in 2014 after taking full control of Galderma, which added acne and skin-cancer treatment to its portfolio. Nestlé said at the time it wanted to take a more holistic approach to health than "mere nutrition" and bolstered the unit with several acquisitions including a $1.4 billion deal for skin-care products from Valeant Pharmaceuticals Inc. But as sales growth slowed, investors questioned how the unit fits into Nestlé's broader business.

Thursday's step underscored Nestlé's prodding approach to revamping its product mix that includes Purina pet food and Lean Cuisine frozen meals and generates annual sales of around 91 billion Swiss francs. Faced with pressure from activist investors two years ago, Nestle said it would focus its capital spending on high-growth areas such coffee, pet care, and infant nutrition in a bid to combat sluggish sales in a fast-changing consumer environment.

Its approach has paid off. Last month, Nestle reported annual comparable sales growth of 3.4%, topping analyst expectations. Its share price is up 28% in the last year. Nestle shares were little changed in early trading Thursday.

Last year, Nestlé sold its Gerber Life Insurance unit to Western & Southern Financial Group for $1.55 billion in cash. It also sold its U.S. confectionery business -- which includes Butterfinger and Baby Ruth candy bars -- to Italian candy-maker Ferrero International SA for $2.8 billion in cash.

Meanwhile, it has beefed up its coffee business. One year ago it bought the rights to market and sell Starbucks coffee and tea products in grocery and retail stores for more than $7 billion. In 2017, Nestlé bought a majority stake in U.S. premium coffee chain Blue Bottle.

In late 2017 it bought Canadian vitamin maker Atrium Innovations Inc., for $2.3 billion.

"Nestlé is well on track in successfully reshuffling its portfolio, " the Vontobel analysts said.

--Anthony Shevlin in Barcelona contributed to this article.

Write to Brian Blackstone at brian.blackstone@wsj.com

(END) Dow Jones Newswires

May 16, 2019 03:44 ET (07:44 GMT)

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