Report: Nestle Wants Purina

N E W  Y O R K, Jan. 15 -- Nestle SA, the Swiss food manufacturer whose products include the Friskies and Alpo pet food brands, is reportedly close to a deal to buy Ralston Purina Co., maker of Purina Dog Chow, for $10 billion in cash.

Negotiations are at an advanced stage and a deal could beannounced in the next few days, The Wall Street Journal reportedtoday, citing a person familiar with the situation. It is believed that Nestle is offering nearly $33 for each shareof Ralston, roughly 34 percent above the St. Louis-based company'sclosing stock price Friday of $24.63 on the New York StockExchange. Nestle declined to comment on the report. A Ralstonspokesman did not immediately return a call to The AssociatedPress.

Major Forces in Pet Food

Ralston controls 27 percent of the $4.3 billion dog-food market,while Nestle accounts for roughly 12 percent, the Journal reported.Ralston is also a leader in cat food sales, holding 33 percent ofthe $2.6 billion market, with Nestle making up for an additional 13percent. An agreement would likely receive antitrust scrutiny and thecompanies could be required to trim their pet food businesses inorder to gain regulatory approval. Rival companies with significant pet-food units, such as Procter& Gamble Co., Colgate-Palmolive Co. and Mars Inc., could try tooutbid Nestle, the Journal reported. Nestle, the world's largestfood company, produces everything from mineral water to dairyproducts to coffee. The company is based in Vevey, Switzerland. Nestle has enlarged its pet food business in the past throughacquisitions. In 1985, the company purchased Carnation, which ownedFriskies, and in 1994 it added the Alpo brand to its holdings. Thecompany picked up one-fifth of Europe's pet-food market in 1998,when it paid more than $1 billion for Britain's Spillers Pet Food,a subsidiary of Dalgety. Nationwide, dog-food sales grew by about 4percent last year, while cat food volume grew by roughly 5 percent.