Nestlé has rekindled early stage talks to buy a majority stake in Champion Petfoods, the Canadian company it initially looked at buying earlier this year before discussions foundered, people close to the situation said.
The private, Edmonton-based company makes premium dog and cat foods with what it calls “fresh, regional ingredients” like vegetables, meat and poultry. One of its backers is private equity fund Bedford Capital.
The people familiar with the situation cautioned that there was no guarantee a deal could be reached. It is also not clear if Champion’s backers want to pursue a sale of the company, which continues to grow quickly.
Nestlé and Champion declined to comment on the deal talks. The Wall Street Journal first reported on talks about Nestlé acquiring a controlling stake for more than $2bn in July of this year.
If finalised, a Champion acquisition would build on Nestlé’s deal earlier this year for UK-based tails.com, which makes personalised dog food tailored by breed, age, and activity level. Chief Executive Mark Schneider last year made pet care one of Nestlé’s four priority growth areas, along with coffee, bottled water and baby food, as the group seeks to offset weaker demand for its packaged foods.
Champion does not disclose its revenue or profit. But its products fit squarely into a fast-growing segment of the pet food market, namely responding to consumers’ desire to give their pets healthier and more authentic food and treats.
Champion touts its pet food as “biologically appropriate”, but faces about a dozen lawsuits alleging it contains heavy metals like mercury and lead. A lawyer for Champion said the lawsuits have no factual or legal merit. “Champion intends to vigorously defend itself in all litigation and judges have already found in our favour regarding a number of our requests during procedural rulings for dismissal,” said Dave Coulson, a lawyer for Champion Petfoods.
Switzerland-based Nestlé is already a major player in pet food thanks to its Purina Petcare subsidiary, which it acquired in 2001.
The talks also amid a period of deal activity for Mr Schneider, who is seeking to blunt critiques from activist investor Third Point that Nestlé is not growing fast enough. He signed a big licensing deal with a Starbucks to expand in coffee, but lost a bidding war win Unilever for Horlicks, a malted hot beverage popular in India. Nestlé has also been in talks with potential buyers of its skin care business, which could fetch SFr7bn.
Last year pet food sales accounted for nearly 15 per cent of Nestlé revenue of 89.8 billion Swiss francs. It was the second-fastest growing category for Nestlé after coffee, delivering 3 per cent organic sales growth.
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