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Nestle offers $840 million to buy out the remaining stake in Osem

February 5
4:56 AM 2016

The Swiss food giant, Nestle is making a move to buy out the shareholders of Osem for $840 million or 3.3 billion shekels. Nestle already owns the majority stake (63.7%) in the other company and, with this buyout, it would take the Israeli food joint completely private.

According to Haaretz, Nestle has offered the Osem shareholders 82.50 shekels a share to take over the portion it doesn't already own. The offer reflects a 26% jump than the company's closing price on Wednesday. The offer also values the remaining 36.3% stake at 9.13 billion shekels.

Before this acquisition, the Swiss company has had experience in taking over underperforming businesses like the weight-loss service run by Jenny Craig and PowerBar sports snacks and turning them into successful ventures. Osem would be Nestle's largest acquisition in the food business since 2012.

The Israeli company is known for making Cheerios breakfast cereal and Bamba which is a peanut-flavored snack, along with ice-creams and salad dressings that it sells under other brand names.

With nine factories in Israel, Osem showed profits worth 294 million shekels on 3.2 billion sales for the first nine months of 2015.  It currently has a market value of 7.3 billion shekels.

According to Bloomberg, Alain Oberhuber, an analyst in MainFirst Bank AG, feels Nestle has adopted the right strategy in fully privatizing the other company by buying out the shares. "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.

Meir Slater, head of research at Bank of Jerusalem Ltd., was in agreement with this decision as well. "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," he stated in a telephonic conversation. "Overall though the move fits into Nestle's strategy as most of its companies are privately held."

As per Reuters, Osem seemed quite positive about the arrangements, "Upon completion of the deal ...the company will become a private completely fully owned by Nestle." However, Nestle still plans to "continue to partner with Osem management to develop the company".

The deal chatter evidently saw an increase in Osem's shares by 22%, with a 0.3% increase for Nestle as well. Now the deal is pending approval from Osem's minority shareholders for which an extraordinary meeting has been scheduled on March 17.  JP Morgan has acted as Nestle's sole advisor in this whole deal. 

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