- The Washington Times - Wednesday, December 12, 2001

Federal regulators approved the $10.3 billion purchase of Ralston Purina by Swiss food giant Nestle S.A., clearing the way for a pet-food empire with such brands as Alpo, Purina, and Friskies.
To win approval, the companies agreed to sell two of Ralston's dry cat food brands Meow Mix and Alley Cat the Federal Trade Commission said yesterday. The decision ends an 11-month antitrust approval process.
Peter Brabeck-Letmathe, Nestle's chief executive, said the FTC's decision "ensures even more competitiveness in the world's most important pet-care market."
Nestle now holds 32 percent of the U.S. cat food market, while St. Louis-based Ralston has 26 percent. Nestle also adds Ralston's 28 percent share of the dog-food market to the 10 percent it already has.
Nestle has agreed to sell the two dry cat-food brands to the Boston-based investment firm J.W. Childs Equity Partners II LP, which owns the pet supply company Hartz Mountain, the FTC said. Nestle will also have to give up international trademarks for Meow Mix and Alley Cat and help Childs take over the brands.
"Without the terms provided by this consent order, Nestle would acquire, among other things, Meow Mix, the best-selling dry cat food brand in the country, and as a result would have nearly a 45 percent share of the U.S. dry cat food market," said Joe Simons, director of the FTC's Bureau of Competition.
The FTC voted 4-0 to approve the deal with Chairman Timothy Muris not voting.
John McMillin, an analyst with Prudential Securities Inc., said Nestle was big in the canned pet-food market, but the deal makes them a major player in the fast-growing area of dry pet food.
"It makes Nestle a better pet-food company," Mr. McMillin said. He said that because of Nestle's international reach the purchase also will "allow Ralston to be more of a global pet-food company."
By selling the two brands, Nestle gives up 10 percent of the dry cat-food market but remains "an extraordinarily dominant pet-food company," Mr. McMillin said.
Last week, Senate Judiciary Committee Chairman Patrick J. Leahy, Vermont Democrat, suggested that the FTC extend its investigation of the merger because of potential antitrust issues. He cited concerns from consumer and farm groups that the deal would lead to higher pet-food prices and give Nestle an unfair advantage on store shelves.
Arthur Jaeger, associate director of the Consumer Federation of America, said the deal also limits consumers' choices.
"By lessening competition, there's less incentive to come up with newer and better products," he said.
Nestle's current pet-food business has annual sales of about $3.7 billion. Last year, Ralston had sales $2.25 billion in the United States and $450 million internationally.
In the deal announced in January, Nestle agreed to pay $33.50 in cash per Ralston share and to assume $1.2 billion in debt, though this was to be partially offset by gains of $900 million from existing investments.
In July, the European Union Commission approved the deal after Nestle agreed to take steps to preserve competition in Spain, Italy and Greece.
Some procedural steps remain. The proposed agreement is subject to a 30-day comment period before the commission makes it final.
Nestle will retain a presence in St. Louis, merging its domestic Friskies pet-food business with Ralston to form Nestle Purina Pet Care, the merged companies' North American operation.

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