ZURICH ZURICH/PARIS Dec 6 Nestle NESN.VX is selling its 10 percent stake in Swiss fragrance and flavour maker Givaudan GIVN.VX in an effort to narrow its focus on core operations and clean up its balance sheet.
Traders on Friday said the sale managed by Goldman Sachs through an accelerated book building was being offered at a price range of 1,150-1,170 Swiss francs a share, valuing the entire stake at as much as 1.08 billion Swiss francs ($1.20 billion).
The range means the placement was done at a 5.3-7.0 percent discount to Thursday's closing price of 1,236 francs. Givaudan shares fell as much as 5.3 percent in early trade on Friday and were down 3.32 percent at 1,194 francs at 0824 GMT.
"I think the cash will be used for bolt-on deals and may help to enable a small buyback potentially within the next 18 months," said Jon Cox, analyst at Kepler Cheuvreux.
The maker of KitKat chocolate bars and Nescafe coffee had bought the stake in Givaudan, one of its suppliers, 11 years ago when it sold Givaudan its food ingredient company FIS for a combination of cash and stock worth 750 million francs.
The move was also aimed at helping prevent Givaudan from being taken over.
"Nestlé has been very satisfied with its holding but believes now is the appropriate time to divest," the Swiss group said in a statement.
Last month, Nestle sold the bulk of its Jenny Craig weight-loss business to a U.S. private equity firm for an undisclosed sum.
It is now looking for a buyer for its PowerBar energy bars, according to people familiar with the matter.
There has also been market speculation that Nestle might part with its 29.5 percent stake in French cosmetics group L'Oreal OREP.PA when restrictions on selling it end in April 2014.
Givaudan shares have risen 153 percent since the FIS sale was announced in January 2002.
Nestle is the second biggest shareholder in Givaudan with a 10.03 percent stake according to Thomson Reuters Eikon data.
(Additional reporting by Astrid Wendlandt in Paris; editing by Jane Merriman and Elaine Hardcastle)