Chocolate Maker Expands Nutrition Division with Jenny Craig Purchase

VEVEY, Swizterland--Known for its chocolate bars, Nestle Foods SA has announced it will purchase weight loss product maker Jenny Craig for $600 million, or 1.5 times sales. Nestle is purchasing Jenny Craig from two private equity groups, ACI Capital and MidOcean Partners, which bought Jenny Craig for $115 million back in 2002, when the diet company was enduring mismanagement. Jenny Craig, based in Carlsbad, Calif., now has more than 3,000 employees and more than 600 centers in the United States Canada, Australia and New Zealand; it posted sales of more than $400 million in the past 12 months and achieved double-digit internal growth, owing largely to the celebrity endorsement of actress Kirstie Alley.

Nestle (www.nestle.com), which also makes infant formula and nutritional foods such as Powerbar and Lean Cuisine, said the purchase will increase its presence in the United States. The company said the current Jenny Craig management team will continue to run the business and will report directly to Nestle Nutrition, as the weight management business will operate within its recently expanded nutrition unit. It recently shelled out $670 million to buy Uncle Tobey's, a major nutritional foods maker based in Australia, where Jenny Craig got its start. The buyer also said no marketing changes were anticipated, and Alley has signed on for another year as Jenny Craig’s spokeswoman.

"With this strategic acquisition, the group takes another important step in its transformation process into a nutrition, health and wellness company that sees weight management as a key competence." said Peter Brabeck-Letmathe, chairman and chief executive officer (CEO) at Nestle. "The rise of obesity and the resulting metabolic disorders, such as diabetes and cardiovascular disease, is a major public health concern, not only in the USA but also the world over. The Jenny Craig acquisition puts us in a privileged posi­tion to help many of our consumers."

The move also helps Nestle keep pace with diet category leader Weight Watchers (NYSE:WTW), as well as food and beverage competitors Unilever (NYSE:UL), which owns Slim-Fast, and ConAgra Foods (NYSE:CAG), which owns Healthy Choice.

"We are excited to be partnering with Nestle Nutrition and believe Jenny Craig will fit nicely into, and in fact complement, their portfolio of branded nutritional products and services," said Patti Larchet, CEO of Jenny Craig. "We also believe being a strategic pillar within the Nestle organization will provide us with technical, scientific and nutritional resources to further develop our program and continue to enhance our client experience and results."

Kent Kreh, chairman of Jenny Craig, explained "It reached a point where the business was doing well and well placed for future growth so the investors decided it was time to exit," he said.

The transaction is expected to close in third quarter but is not expected to dilute group earnings.