FTC Approves Nestle Purchase of Carnation

The Federal Trade Commission said Friday that it had unconditionally approved Nestle S.A.’s $3-billion acquisition of Carnation Co., clearing the way for what will become the largest non-oil merger in history.

The approval, by a 4-1 vote, now allows Nestle, a giant Swiss-based food conglomerate, to complete its $83-a-share cash tender offer begun last Sept. 5 for all outstanding shares of Los Angeles-based Carnation, a diversified food company specializing in dairy, pet and container products.

That offer had been extended to Jan. 21, presumably to allow time for the FTC approval.

Approval had been generally expected but there was some doubt among industry analysts whether or not the FTC would require divestitures or other conditions that conceivably could have made the merger unattractive to Nestle.

FTC Approval Required

Last year, Nestle dropped plans to acquire CooperVision Inc., an eye-care products company, after the FTC said it would oppose the deal.

Both Nestle and Carnation make hot-cocoa, frozen-food and dairy products. Under a 1979 FTC order that expires Monday, Nestle was required to obtain FTC approval before acquiring any company that manufactures or sells more than $10 million in frozen prepared foods.

The 1979 order settled FTC charges that Nestle’s 1973 acquisition of Stouffer Foods substantially reduced competition in the frozen food market.

Commissioner Patricia P. Bailey, the lone dissenter in the Carnation decision, argued that “the merger has a definite anti-competitive potential in hot-cocoa products markets.” She added that “partial divestiture or trade-name licensing” would have been preferable as a condition for allowing the merger to proceed.

However, the other commissioners disagreed and imposed no conditions. “They are free to go ahead,” FTC spokesman Neal Friedman said.

Carnation officials refused to comment on the approval. Nestle officials could not be reached for comment.