LONDON/ZURICH: Swiss food group Nestle has stepped up its drive into the fast-growing skincare market on Wednesday, buying the rights to several treatments for facial lines and wrinkles from Valeant Pharmaceuticals International VRX.TO for $1.4 billion in cash.
The world’s biggest food group, with brands including KitKat chocolate bars, Gerber baby food and Nescafe coffee, signalled its ambitions in skincare in February by taking over the Galderma dermatology venture it had with L’Oreal OREP.PA.
Wednesday’s move gives Nestle the North American rights to some products taken on in that deal, boosting its control of the brands and avoiding the situation with KitKat, to which rival Hershey HSY.N owns the rights in the United States.
Citing data from GlobalData Facial Aesthetics, Vontobel analysts said the U.S. market for Botox and other wrinkle fillers, is set to grow from $2.5 billion in 2013 to $4.7 billion in 2018 - compound annual growth of 13.5 per cent.
“These figures speak for themselves and explain how strategic the deal is for Nestle/Galderma,” the analysts said in a research note. “Nestle did not want to be in a similar situation as for Hershey (with KitKat).”
Nestle shares, which have performed just ahead of the FTSE Eurofirst 300 Consumer Goods Index this year, were up 0.2 per cent to 69.7 Swiss francs. European food groups, struggling with weak economies, are increasingly moving into health and personal care markets in pursuit of higher growth and margins. Unilever ULVR.L, for example, has been selling underperforming food brands and putting more focus on personal care products such as soap and shampoo.
Nestle said the deal with Canada’s Valeant would give it the U.S. and Canadian rights to sell the Restylane, Perlane and Emervel cosmetic facial treatments it already manufactures, as well as Dysport, a cosmetic treatment owned by Ipsen IPN.PA.
It is also acquiring from Valeant a dermal filler for cosmetic and medical use called Sculptra.
Quebec-based Valeant, which inherited the North American rights in its 2012 acquisition of Medicis, said the deal was not contingent on the success of its bid for US drug company Allergan.
The Canadian firm increased its offer for Allergan, whose biggest product is botulinum toxin, or Botox, a few hours after announcing the deal with Nestle. ìWith this deal we have acquired key strategic assets to extend Nestleís activities in the field of specialized, medical skin treatments, providing consumers with life-enhancing scientific products,î Nestle Chairman Peter Brabeck-Letmathe said.
?This move will reinforce Galderma’s leading position in the industry when it becomes Nestle Skin Health by allowing it to complete its geographic footprint for its strong portfolio of brands and leading medical solutions globally.?
Nestle also has a unit called Nestle Health Science that sells medical nutrition products for people with specific dietary needs related to illness or disease. It is also among the shortlist of bidders for the medical nutrition business of Danone, valued at about 4 billion euros ($5.5 billion), sources have told Reuters.
Nestle Health Science is working as well to develop products in the areas of gastrointestinal, metabolic and brain health.
Nestle expects to close its purchase of Galderma in July and expects to operate the new assets through that business.