1. Nestlé Acquisition of Gerber Jeff Hsu Joe Orvidas

2. Table of Contents Nestlé Background Gerber Background Novartis Background Past Acquisitions The Deal Effects of Acquisition Future Expectations

3. Nestlé Background Founder of Nestlé  Henri Nestlé A Swiss Company Three different nutrition divisions  Healthcare Nutrition, infant nutrition, and performance nutrition Largest manufacturer of infant nutritional products

4. Gerber Background Founders of Gerber  Daniel Gerber and Dorothy Gerber Largest seller of baby food in U.S. In 2000, Gerber began selling a line of powders, oils and other toiletries for children In 2002 it launched microwaveable meals for older toddlers Has a life insurance unit

5. Novartis Background A Swiss Company Pharmaceutical manufacturer Looking to sell Gerber to streamline portfolio and focus on health care

6. Past Acquisitions Bought Jenny Craig for $600 million Bought medical nutrition division from Novartis for $2.5 billion

7. The Deal In 1994, tried to acquire Gerber, but lost to Sandoz Nestlé acquired Gerber for $5.5 billion on April 12, 2007 Nestlé now holds the largest share of the global baby food market

8. The Effects of the Acquisition Before the Gerber acquisition, Nestlé had no presence in the U.S. Gerber has 81% of the canned baby food market

9. Top Baby Food Makers Source: Grocery Headquarters, p.30

10. Future Expectations Trying to expand the brand name of Gerber to European countries  Proven to have been successful in this area Cost synergies of $95 million by 2011 Gerber expected to generate sales of $1.95 billion  Expected to grow at 8.5% annually

11. Calculate the Value of Nestlé The expected cash flow at the end of the year is $11.5 billion (FCF1). Assuming a growth rate of 8.5% for the next two years, the cash flows are $12.5 billion (FCF2) and $13.5 billion (FCF3), respectively. Then assume that the future cash flows will grow at a constant growth rate of 5% for the fourth year and beyond. Use a 10% cost of capital. Find the present value of the future cash flows. A) $180.58 billion B) $201.90 billion C) $243.92 billion D) $287.85 billion E) Not sure

12. Answer $11.5 billion / (1+.1)^1 = $10.45 billion $12.5 billion / (1+.1)^2 = $10.33 billion $13.5 billion / (1+.1)^3 = $10.14 billion [[$13.5 billion x (1.05)] / (.1-.05)] x (1/1.1)^3 = $213.00 billion $10.45 + $10.33 + $10.14 + $213.00 =$243.92 billion

13. What the CEO of Nestlé had to say "The acquisition of Gerber is the perfect complementary fit. It not only gives Nestlé the leadership position in baby food, but it also constitutes a decisive step to establish Nestlé Nutrition as the undisputed global leader in the nutrition field. This is a major step in the transformational journey of Nestlé toward a Nutrition, Health and Wellness Company. It is my great pleasure to welcome the employees of Gerber to the Nestlé Group." - Peter Brabeck-Letmathe, CEO of Nestlé

14. Thanks for your attention. Questions?

15. Sources http://www.ir.nestle.com http://www.forbes.com/markets/2007/04/12/nestle-gerber-update- markets-equity-cx_po_0412markets07.html http://www.freep.com/apps/pbcs.dll/article?AID=/20070413/BUSINE SS06/704130353 Grocery Headquarters, August, 2004, p.30