MILAN/LONDON/NEW YORK (Reuters) - Food giant Nestle NESN.N plans to pick a buyer for its U.S. chocolate business by the end of this week, three sources close to the matter said on Wednesday, in a deal expected to top $2.5 billion (£1.85 billion).
Italy’s Ferrero is seen as a front-runner, according to several other sources, who said that the maker of the Nutella spread was keen to boost its presence in the U.S. market, following last year’s purchase of the U.S. groups Ferrara and Fannie May.
One source said Ferrero raised its offer for Nestle’s business last week in an attempt to outbid rival Hershey (HSY.N).
“(Executive Chairman) Giovanni Ferrero is really committed to the deal, that’s why the group sweetened its offer to something in the area of $2.5 billion,” the source said.
Nestle and Ferrero declined to comment, Hershey was not immediately available for comment.
If successful, the deal would make Ferrero the third-biggest confectioner in the United States after Mars Inc. and Hershey, according market research provider Euromonitor.
Nestle in June said it was exploring strategic options for the business, which includes candy bar brands such as Butterfinger and Baby Ruth, and had sales of more than $900 million in 2016. It is keeping the rest of the global business, which includes KitKat and Aero.
Ferrero, which also makes Ferrero Rocher pralines and Kinder chocolate eggs, is run by Giovanni Ferrero, whose grandfather founded the firm in 1946 in the small Italian town of Alba, in Piedmont.
For many years Ferrero relied on internal growth but began making acquisitions after Giovanni became the company’s sole CEO in 2011 following the death of his brother.
Reporting by Francesca Landini in Milan, Martinne Geller and Pamela Barbaglia in London and Harry Brumpton in New York. Editing by Jane Merriman