Givaudan Drops on Nestle’s Plan to Sell Entire Stake

Givaudan SA (GIVN) fell the most in more than a year after Nestle SA (NESN) initiated a process to sell its entire stake in the world’s largest flavors and fragrances maker, valued at more than $1 billion.

Givaudan stock dropped as much as 5.3 percent to 1,170 Swiss francs and traded at 1,193 francs as of 9:22 a.m. in Zurich trading. That was the biggest intraday decline since August, 2012. Nestle advanced as much as 1.3 percent.

The maker of Nespresso coffee machines plans to sell all of its 926,562 Givaudan shares, according to a statement yesterday on its website. Nestle acquired the stake in 2002 when Givaudan bought Nestle’s food-ingredient business for 750 million Swiss francs -- $450 million at the time -- in cash and shares. Givaudan stock has more than doubled since Jan. 18, 2002, the day the deal with Nestle was announced. Nestle’s stake was valued at about $1.27 billion at yesterday’s close.

“A 10 percent stake in Givaudan was no longer strategic,” Jean Philippe Bertschy, an analyst at Bank Vontobel AG in Zurich, said by email. “Nestle made a nice profit out of the stake, and will remain one of Givaudan’s key customers.”

The Nespresso coffee maker was the second-biggest owner of Givaudan shares with a 10 percent stake as of Dec. 31, according to data compiled by Bloomberg. Goldman Sachs Group Inc. is managing the sale.

“Nestle has been very satisfied with its holding but believes now is the appropriate time to divest,” Nestle said.

Asset Disposals

Nestle, based in Vevey, Switzerland, last month sold most of its Jenny Craig diet business to North Castle Partners as it embarks on an effort to dispose of underperforming units. Chief Executive Officer Paul Bulcke has said the company is drawing up a shortlist of businesses it’s looking to sell after identifying laggards it can’t fix.

Ahead of April’s expiry of restrictions on selling its 29 percent stake in French cosmetics maker L’Oreal SA, Nestle has said it is keeping all options open. Many analysts say Nestle is more likely to sell and exit about 22.4 billion euros ($29.5 billion) richer or simply maintain the position since the holding today generates about a 10th of its net income. Nestle bought a stake in L’Oreal in 1974 from the Bettencourt family, the billionaire heirs of the cosmetics maker’s founder.

“Nestle is cleaning up its balance sheet and I think this is part of the process,” Jon Cox, an analyst at Kepler Cheuvreux, said in an e-mail. “Originally the stake was strategic and was to prevent any takeover of Givaudan. But now Givaudan has outgrown that. If anything it shows that a L’Oreal stake disposal is not on the agenda.”

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