Swiss food giant Nestle on Monday reiterated its interest in some cereal brands put up for sale by Novartis as speculation mounted that the food firm is among the last bidders for the drug firm's health and functional food unit.
The Novartis unit, placed on the market in February as Europe's third largest drugs firm sharpens its focus on healthcare, includes the Ovaltine drink, sports drink Isostar and health food and slimming products Cereal and Gerble.
"We have stated quite clearly that Ovaltine is clearly not a product that has any certain priority for Nestle. We have also said that if there was an interest it would be more in the area of the cereals and nutritional foods," Nestle spokesman Francois Perroud told Reuters.
Britain's Sunday Telegraph newspaper reported that three bidders, Nestle, and private equity players Legal & General Ventures and Electra Partners, are in an auction organised by Credit Suisse First Boston and a decision was expected in four weeks.
Novartis refused to comment.
While some firms have been keeping a low profile during the current economic downturn, cash-rich Nestle, the world's largest food group, has been on a buying spree and is mentioned as a possible bidder whenever a business comes up for sale in the fast consolidating food sector.
Last week, Nestle said it would buy privately-held Chef America for $2.6 billion (€2.7bn) and it has also been linked as a potential bidder for Hershey Foods and Pfizer's Adams unit.
US confectionery maker Hershey could cost up to $12 billion, while Adams confectionery could cost around $4 billion.
"We are not going to comment on each and every rumour that crops up," said Perroud. "I am quite busy saying 'no comment' at the moment," he added.
Despite the money involved, analysts maintain that Nestle could afford both Adams and Hershey even after the Chef America deal.
"We estimate that even after (Chef America), Nestle could buy Hershey and Adams and still have EBITDA/interest expense coverage of over four times," said CSFB analyst David Nelson in a note, referring to a key interest ratio.
"The question is whether the company will be willing to jeopardise its coveted AAA debt rating," Nelson added.
Lower debt ratings means higher interest rate costs.
Novartis's health and functional food unit had sales of SF850 million in 2001. Analysts said the unit could fetch around two times the sales, or some 1.7 billion francs - small potatoes compared to other Nestle deals.
Nestle bought US pet food firm Ralston Purina at the end of last year in a deal worth over $10 billion.
Nestle shares have fallen by around seven per cent this year, in line with European peers, but have gained in the last few sessions on talk of the Hershey bid as well as Nestle's insistence that it is keen to regain its top-selling Kit Kat brand in the United States, currently made by Hershey under licence.