Nestle on brink of $10bn deal to buy US company

Shares in Nestle put on 2.3 per cent to SFr3,471 as the market digested a press report that the group was on the brink of a $10 billion deal to buy Ralston Purina in the US. The deal would significantly boost Nestle's position in the pet food market.

One analyst said: "Strategically, we would not be at all surprised if this purchase was to go ahead. Nestle has been itching for a big deal and Ralston must have been at the top of their list of potential targets. It would be a very good deal in terms of offering significant synergies." But he cautioned that any purchase was likely to face testing questions from the US regulatory authorities. And while the price mooted was "at the top end of the range for Ralston, Nestle could find it without blinking an eyelid".

Shares in Nestle, which had no comment on the report, have been under heavy pressure since the start of the year, falling 10.7 per cent in the first two weeks. The tumble reflected concerns over the prospects for the world's largest food group in the face of economic slowdown in the US. Yesterday, Morgan Stanley Dean Witter cut its share price target for Nestle to SFr3,800 from SFr4,100. Last week, Lehman Brothers removed Nestle from its recommended portfolio.

Competition in the European confectionary market hotted up as Italian sweets maker Perfetti launched a bid for shares in Dutch confectioner Van Melle that it does not already own. Van Melle

soared 71.1 per cent to €54.75 as Perfetti offered €55 a share for the outstanding 63 per cent of the Italian group. The tie-up would create a leading worldwide confectioner with annual sales of more than €1.2 billion. The cash offer values Van Melle at €966 million and is a 72 per cent premium to Van Melle's Friday's closing price.

Cremonini, Italy's number one hamburger meat maker, was suspended after health authorities discovered the country's first suspected case of mad cow disease in six years in an animal destined for a Cremonini slaughterhouse. The shares fell to a low of €1.69 but steadied to close 5.1 per cent down at €1.84.

Oils stayed in demand ahead of tomorrow's OPEC meeting where members are expected to ratify production cuts of 1.5 million barrels a day. This is seen as a clear statement of intent that OPEC intends to do all it can to keep the commodity price in line with targets prices of $25-$28 a barrel. And with cold weather helping sentiment oil leaders pushed ahead. Royal Dutch gained 3 per cent at €65.59 and Total Fina Elf 2 per cent at €158.3. Repsol added 1.7 per cent at €19.21.

The Finnish mobile phone maker Nokia fell 14 cents to €43.72 after Schroder Salomon Smith Barney cut its target price from €57 to €47 but reiterated its "outperform" rating on the stock, calling it an "excellent" company. Deutsche Bank said Nokia, along with Alcatel and the German optical networking company Adva, were its top telecom equipment picks for 2001.

Telecoms were mixed, with France Telecom down 2.8 per cent at €92.30 but Deutsche Telekom rose 0.4 per cent to €37.29. Cybertron, the Austrian telecoms provider, briefly shot up almost 30 per cent after an anonymous newspaper advertisement offering to buy all its shares. The shares ended 7.5 per cent up at €5.91.