Go to the Globe and Mail homepage

Jump to main navigationJump to main content

The Nestle logo is pictured on a truck outside the company's headquarters before the nine-month sale figures news conference in Vevey October 17, 2013. (Denis Balibouse/Reuters)
The Nestle logo is pictured on a truck outside the company's headquarters before the nine-month sale figures news conference in Vevey October 17, 2013. (Denis Balibouse/Reuters)

Nestlé boosts skincare business with $1.4-billion Valeant deal Add to ...

Swiss food group Nestlé SA accelerated a push into the fast-growing skincare market on Wednesday, buying the rights to several injectable treatments for facial wrinkles and lines from Valeant Pharmaceuticals International Inc. for $1.4-billion.

The world’s biggest food group, with brands including KitKat chocolate bars, Gerber baby food and Nescafe coffee, signalled its ambitions in skin health products in February by taking over the Galderma dermatology venture it had with L’Oreal.

Reuters May. 28 2014, 11:25 AM EDT

Video: Is Nestle skin care deal a beauty?

More Related to this Story

Wednesday’s move gives Nestlé the North American rights to some products taken on in that deal, boosting its control of the brands and avoiding the situation with KitKat, to which rival Hershey owns the rights in the United States.

For Quebec-based Valeant, the cash deal clears a potential antitrust hurdle to its proposed $49-billion takeover of U.S. rival Allergan Inc., which makes Botox, used to treat conditions from frown lines to overactive bladder.

For Nestlé, the deal marks the latest step in a march begun almost two decades ago by chairman and then-CEO Peter Brabeck-Lemathe to transform the sweets company into a global leader in nutrition, health and wellness, although some analysts question whether cosmetic skin treatments fit into that category.

“They are trying to squeeze it under a wellness umbrella. It’s a stretch,” said a European food analyst.

The world’s biggest producers of packaged foods are moving increasingly toward healthier food products or personal-care goods that offer faster sales growth and wider profit margins.

Citing data from GlobalData Facial Aesthetics, Vontobel analysts said the U.S. market for Botox and other wrinkle fillers was set to grow from $2.5-billion in 2013 to $4.7-billion in 2018 – compound annual growth of 13.5 per cent.

“These figures speak for themselves and explain how strategic the deal is for Nestlé/Galderma,” said the analysts, who rate Nestlé stock a “buy”.

SKIN FILLER

Nestlé said the deal with Valeant would give it the U.S. and Canadian rights to sell the Restylane, Perlane and Emervel injectable cosmetic treatments it already manufactures, as well as Dysport, a cosmetic treatment owned by Ipsen.

It is also acquiring from Valeant a skin filler for cosmetic and medical use called Sculptra.

Valeant, which inherited the North American rights in its 2012 acquisition of Medicis, said the deal fit with its plans. It raised its bid for Allergan a few hours after announcing the deal with Nestlé.

“By selling it ahead of time we have eliminated one more roadblock in terms of our integration with Allergan and we were able to get a price that was more than five times sales, so we think it also creates real shareholder value,” said Valeant chief executive Michael Pearson.

By comparison, Nestlé paid 3.9-times sales to take over Galderma. Valeant’s earlier, spurned offer for Allergan was worth 7.1 times sales.

NESTLÉ HEALTH

Beside its new Skin Health division, Nestlé has a unit called Nestlé Health Science that sells medical nutrition products for people with specific dietary needs related to illness or disease. It is also on a shortlist of bidders for the medical nutrition business of Danone, valued at about €4-billion ($5.5-billion), sources have told Reuters.

Nestlé Health Science is working as well to develop products in gastrointestinal, metabolic and brain health.

“I can see the rationale behind that,” said Berenberg Bank analyst Fintan Ryan. “Nutrition and health is becoming more important to consumers, so it’s increasingly going to be a bigger part of what Nestlé does.”

When it comes to the skin business, Ryan was more skeptical.

“I don’t see this being the future of Nestlé,” he said.

Follow us on Twitter: @GlobeBusiness

 
  • VRX-N
  • AGN-N
  • VRX-T
Live Discussion of VRX on StockTwits
More Discussion on VRX-N
Live Discussion of AGN on StockTwits
More Discussion on AGN-N
Live Discussion of VRX on StockTwits
More Discussion on VRX-T

Topics:

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories