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Nestle SA Reg Shs. Ser. B Spons (ADR)(OTCMKTS:NSRGY) confirmed that it is in advanced talks to merge its international ice-cream operations with R&R Ice Cream. This will help the company to focus on other leading brands. Nestle’s ice cream segment includes over 150 brands including Nestle Scholler, Extreme and Movenpick. Its ice-cream businesses in the U.S., which cover Dreyer’s, Haagen-Dazs and Edy’s, will not form a part of the deal.

The details

Nestle confirmed the merger talks after Reuters reported that R&R Ice Cream, maker of Rowntree’s Fruit Pastille lollies, Kelly’s Cornish ice cream and Cadbury Flake Cones,, was in discussions with Nestle to create a joint venture in a $3.4 billion deal. Nestle stated that it will contribute its ice-cream operations in Brazil, Argentina, Europe, Egypt and the Philippines, along with its European frozen food operations, excluding pizza. All of UK-based R&R Ice Cream, owned by PAI, will form a part of the joint venture.

The objective

Nestle’s ice cream operations always reported weaker returns compared to its other business segments. In fact, the global ice cream market is under pressure as consumer preferences shifts toward more of healthy, premium and fresh food brands. The company’s share of the worldwide market, valued at $67 billion, is 10.8%, down from 12.8% in year 2010. R&R market share stands at 0.8%.

The market

Nestle manages an extensive portfolio including Nescafe coffee, KitKat bars, Purina pet food and Gerber baby food. This diversification has been a blessing in times of global economic downturn. Still, the company has been reviewing its product portfolio, removing underperforming brands and shifting its focus on markets performing well.

In last couple of years, the company has shun most of its Power Bar snacks, Jenny Craig diet food business and Juicy Juice drink in the United States, its ice cream ops in South Africa and frozen food operations in Spain. The experts believe that Nestle can follow same things with its frozen food operations in the U.S.

nsr

Nestle SA Reg Shs. Ser. B Spons (ADR) (OTCMKTS:NSRGY) continued its short term rally to end the first trading session of the week with a gain of 1%. The volume of the day at 335,000 remained lower than the daily average of 507,000. Now the stock faces a stiff challenge in the short term as it has reached the intermediate swing high and supply area around $77. Only a firm break and weekly closing above $77 can push it much higher to the long term resistance area around $80. The long term structure of the stock remains firmly bullish but short term corrections can’t be ruled out.

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Steve Kanaval: Portfolio Manager/Writer/ Market Analyst Steve began his career in the Trading Pits in Chicago making markets at the Chicago Mercantile Exchange (NYSE:CME) the Chicago Board of Trade and the CBOE in the early 80’s. He ran the Morgan Stanley Derivative Prop Trading for the firm specializing in Index Arbitrage. He continued his career as a Trader/Portfolio Manager for multiple Hedge Funds during the Internet Boom of the 90’s managing large portfolios. Steve is known as an expert in MicroCap Technology Stocks and the emerging Digital Currency markets as a Portfolio Manager for his Family Office. Steve has managed portfolio’s in volatile asset classes for 3 decades as a commodity trader, hedge fund manager and digital currency trader and miner. Steve publishes his views on the asset classes in a public forum and has published more than 10,000 articles simplifying these complex and volatile assets for readers. His work is published on multiple sites including Bloomberg, Equities.com, Hacked.com, CryptoCurrencyNews as a paid contributor. His work includes research, journalism and archived video on important market volatility related to stocks, digital currency and other volatile misunderstood asset classes. He offers a humorous, unique insight and the related back stories and drivers for readers interested in volatility and emerging market assets. Full disclosure Steve is long 25 digital currencies and sits on the board of multiple public companies involved in digital currencies, and owns shares in these companies from time to time.

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