Nestlé sells Buitoni North American business to private equity firm

09-Jun-2020 - Last updated on 09-Jun-2020 at 14:45 GMT

Photo Credit: Buitoni Pasta

Private equity firm Brynwood Partners VII will acquire refrigerated pasta brand Buitoni’s North American business from Nestlé USA, forming the Buitoni Food Company headquartered in Stamford, Connecticut.

Brynwood Partners will also acquire Buitoni’s 240,000 manufacturing facility in Danville, Virginia, which employees 525 full-time workers producing refrigerated pastas and other products including shredded cheeses and sauces.

“The Danville, Virginia, facility will enable us to quickly invest in new culinary and eating trends so that we can build on the strong foundation of current Buitoni offerings. We look forward to innovating and growing the Buitoni brand as more consumers seek out high quality meals that can be easily prepared at home," said Henk Hartong III, chairman and CEO of Brynwood Partners.

The transaction includes the rights to the Buitoni brand in the US, Canada, and the Caribbean territories. Buitoni Food Company will continue to manufacture Nestlé Toll House cookie dough products from its Virginia facility under a long-term supply agreement.

“This marks the eighth transaction we have completed with Nestlé, and we look forward to continuing our relationship," said Ian MacTaggart, President, CFO and COO of Brynwood Partners.

Since 2003, Brynwood Partners has acquired the Flipz, DeMet's Turtles, Treasures, Stixx, Juicy Juice, Bit O Honey, Nutrament, and Joseph's Gourmet Pasta brands from Nestlé.

The private equity firm’s full $1bn portfolio includes 55 brands from 20 different corporate companies including Back to Nature, Lightlife, and Pillsbury.

Future divestments?

Buitoni generated sales of $130m in 2019, according to global investment banking firm, Mainfirst (a Stifel Company), which estimates the transaction price of the acquisition to be $115m.

“We think that the move corresponds to Nestlé’s strategy to focus on higher growth, higher margin businesses,” commented Mainfirst.

"CEO, Mark Schneider, in our view, will shape Nestlé even more to exit low organic sales growth, low margin activities and invest in consumer health and medical nutrition (Nestlé Health Science), which have higher margins and growth rates."

Nestlé will maintain its Buitoni pizza business in Europe but additional divestments in its prepared foods division may be on the horizon, Mainfirst predicts.

“We assume that frozen dishes with the brands of Buitoni pizza, Wagner pizza in Europe, as well as Stouffers and Hot Pockets in the USA, could be divested in the future, as growth and margins remain lower than the group level,” the firm stated.

Nestlé has been reshaping its portfolio in recent years, selling its US chocolate business to Ferrero in 2018 and announcing the sale of its US ice cream business last year. In turn, it has acquired on-trend brands such as cold brew coffee brand Chameleon and plant-based foods brand Sweet Earth.