- News>
- Companies & Commodities
Brazil says Nestle must sell chocolate unit Garoto
Brasilia, Feb 05: In an unusual show of force, Brazil`s antitrust body ordered Swiss food giant Nestle on Wednesday to sell a chocolate-making unit it bought two years ago in a $230 million deal.
Brasilia, Feb 05: In an unusual show of force, Brazil's antitrust body ordered Swiss food giant Nestle on Wednesday to sell a chocolate-making unit it bought two years ago in a $230 million deal.
The Administrative Council of Economic Defense, or CADE, said the combined operations of Nestle and Brazil's Chocolates Garoto was a threat to fair competition, with their joint market share reaching as high as 89 percent in some sectors of the country's $900 million chocolate market.
Nestle will have 20 days to appoint a third party firm to find potential buyers for Garoto.
That firm will in turn have 40 days to present a report on possible buyers to the CADE, after which Nestle must sell the business within 90 days to a company with less than 20 percent of the market or face a daily fine of 30,000 reais ($10,274).
The five-to-one decision by CADE came as a surprise to industry watchers, who had expected the monopoly watchdog to approve Nestle's purchase with some restrictions.
"I consider this a precedent, a turning point," said CADE's president, Joao Grandino Rodas.
The decision stymied Nestle's campaign to overtake Kraft Foods Inc. as the market leader in Latin America's largest country.
"The decision upsets me," said Ivan Zurita, the chairman of Nestle Brasil. "It wasn't the decision we expected."
Kraft and Britain's Cadbury Schweppes had originally petitioned CADE to block the deal, and a source close to Cadbury said the company was keen to buy Garoto.
Cadbury was outbid by Nestle when Garoto's Meyerfreund family put the company up for sale more than two years ago.
Bureau Report
Nestle will have 20 days to appoint a third party firm to find potential buyers for Garoto.
That firm will in turn have 40 days to present a report on possible buyers to the CADE, after which Nestle must sell the business within 90 days to a company with less than 20 percent of the market or face a daily fine of 30,000 reais ($10,274).
The five-to-one decision by CADE came as a surprise to industry watchers, who had expected the monopoly watchdog to approve Nestle's purchase with some restrictions.
"I consider this a precedent, a turning point," said CADE's president, Joao Grandino Rodas.
The decision stymied Nestle's campaign to overtake Kraft Foods Inc. as the market leader in Latin America's largest country.
"The decision upsets me," said Ivan Zurita, the chairman of Nestle Brasil. "It wasn't the decision we expected."
Kraft and Britain's Cadbury Schweppes had originally petitioned CADE to block the deal, and a source close to Cadbury said the company was keen to buy Garoto.
Cadbury was outbid by Nestle when Garoto's Meyerfreund family put the company up for sale more than two years ago.
Bureau Report