Nestle Case

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THE

NESTLl?

TAKEOVER

01;

ROWNTREE

The NestleTakeoverof
Rowntree:
A Case Study
DANA

HYDE, Ph.D. candidate,
INSEAD, Fontainebleau,
France; JAMES ELLERT, IMD
Faculty, Lausanne,
Switzerland;
J PETER KILLING, Associate
Professor of Business
Administration,
University of Western Ontario, Canada

Against a background of weak share price
behaviour and weak (although improving)
operating performance,
Rowntree plc found
itself subject to a Dawn Raid on its shares
early in 1988 by Jacobs Suchard, the Swiss
confectionery
company.
This seemed a good moment to turn
previous collaboration
discussions with Nestle
into a full-blown White Knight takeover.
However, the discussions were very friendly:
complementarity
in products was clearly in
evidence, and Nestle saw much synergy
through R and D, products, administration
and
sales force, leading to economies of scale.
It is a Case Study of an eminently sensible
integration of two companies in a competitive
business. The negotiations were conducted in a
mature way; there are echoes of style here of
later takeovers like the end-1990
acquisition of
Cruzcampo, the large Spanish brewery, by
Guinness.

Wednesday,

April

1.3, 1988,

10.3)

as he prepared
for the meeting with his Comite du Conseil that afternoon,
Mr Maucher worried about Rowntrcc
falling into the hands of one of Nestle’s
major competitors.

The Chocolate Industry
‘Confectionery’
was
conventionally
divided
into
‘chocolate’
confectionery
and ‘sugar’ confectionery.
‘Chocolate
confectionery
included
products
made with
chocolate;
‘sugar’ confectionery
included
boiled sweets,
toffees, chewing
gum, and other gums and jellies. Chocolate consumption
represented
a stable 54% of the total
~~olume of confectionery
consumption
in the major
\vorld markets
between
1982 and 19X’.

Markets

a.m.

‘Our offer to help remains open, Mr. Dixon, and 1 urge
you to reconsider
our proposals.
Please keep in touch.’
Mr. Helmut Maucher,
Managing Director
of Nest16 S.A.,
replaced
the receiver
and shook his head regretfully
as
he looked
out from his office over Lake Geneva.
On
receiving
the news of Jacobs
Suchard’s
dawn raid on
Rowntree
plc, Mr. Maucher
had called Mr. Kenneth
Dixon, Rowntree’s
Chairman,
to offer Nestle’s help and
renew NestE’s earlier proposal
to purchase
a stake in
Rowntree.
Rowntree
had been an attractive takeover target for
some time, and Mr Maucher and his colleagues
had often
discussed
the possibility
of making a bid. However,
it
was clear that Rowntree
would aggressively
contest an)
takeover
attempt and. as Nestle had never engaged
in a
hostile takeover,
Mr Maucher
had done nothing
more
than initiate talks with the British-based
confectioner.
Rut
EIIROPEAN

MANAGEMENT

JOIJRNAL

Vol

9 No

1 March

1991

In txlue terms, more chocolate
was consumed
than any
other manufactured
food product
in the world. In 19x7
the population
of the world’s eight major markets CYXIsumed more than 2.7 million tonnes of chocolate (the
equivalent
of over 100 billion Kit Kats), with a retail value
of over $19.5 billion (Table 1). In volume terms, chocolate consumption in the eight major markets
rep
resented
61 ‘% of total world chocolate
consumption
in
19X7. Average per capita consumption
in these markets
\vas 4.3 kg per annum, with an annual per capita cxpenditurr of $3 1. Between 1982 and l%V, volume growth
averaged
2.8% per annum in the eight major markets.
Future growth was estimated
at 2.2% per annum for the
next five J’ears. with some \,ariations
across individual
markets (Table 2).

Product

Types

Within chocolate
confectionery
product
types* :
.

blocks

-

generally

molded

there

were

blocks

*I’foduct dctinitions varied widely by country.
13ritish procluct definitions have

ot this CISC,

three

m;ljot

of chocolate.
For...
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