Nestlé poised to join battle over Cadbury

The agreement to sell the remaining 52 per cent holding in Alcon to healthcare firm Novartis is expected to raise $28.1bn (17.4bn). Nestl bought Alcon for $280m in 1977, making it a highly profitable acquisition for the Kit Kat maker.

Nestl, which has factories in York, Halifax and Castleford, said it had realised more than $40bn (24.7bn) from Alcon after selling a quarter of the business on the stock market in 2002 and a further 24.8 per cent stake to Novartis in 2008. The Swiss drugs firm held an option to buy the remainder of the company from this month.

Nestl's fundraising raised speculation it could use some of the proceeds for acquisitions, although it has yet to disclose any interest in bidding for UK takeover target Cadbury.

The Dairy Milk maker, which has a factory in Sheffield, is resisting a 10bn bid from US food giant Kraft, dismissing it as an attempt to buy it "on the cheap".

Analysts said the sale could mean the company is building a war chest to enter the bidding for Cadbury, possibly alongside US confectionery firm Hershey.

"They still have plenty of firepower to do sizeable acquisitions despite their comments that this is not on the agenda," said Evolution Securities analyst Warren Ackerman. "Given the relatively conservative buyback, Nestl could well be keeping their powder dry (possibly) to get involved in Cadbury (probably alongside Hershey)."

Nestl said plans to use some of the cash to extend its share buy-back programme by another $10bn (6.2bn) over the next two years. It is in the process of returning $25bn (15.5bn) to shareholders.

Mr Ackerman added: "If they do not get involved, it remains possible that Nestl could increase the buyback or announce a special dividend."

However, Jeremy Batstone-Carr at Charles Stanley issued a reduce recommendation on Cadbury, and said Nestl's role "is likely to be limited to interest in the latter's gum operations, should Kraft or another suitor emerge triumphant".

He added: "Our reduce recommendation is predicated on the view that Cadbury will do enough to ensure sufficient shareholder support to see off its rivals."

Alcon is the world's largest eye care company with 2008 sales of $6.3bn (3.9bn) and annual net earnings of $2bn (1.2bn). It is a supplier of contact lens solutions, as well as surgical and pharmaceutical products. The global leader in cataract and vitreoretinal surgery has more than 60 per cent of micro-incision cataract surgery.

Chairman Peter Brabeck-Letmathe said Nestl's support helped Alcon's management turn a minor player into a global leader of the ophthalmologic sector.

Chief executive Paul Buckle added the sale would enable Nestle to concentrate on "accelerating" its development as the world's leading nutrition, health and wellness company.

Alcon was founded in 1945 in Fort Worth, Texas and now employs about 15,000 people worldwide. It has its UK base at Hemel Hempstead in Hertfordshire, as well as a facility at Cork, Ireland.

Novartis said it also intended to acquire the 23 per cent of Alcon held by minority shareholders, taking the value of yesterday's move to about $38.5bn (23.8bn).

Basel-based Novartis has a production site in Grimsby and a research and development facility at Horsham, West Sussex. It generated annual sales of $41.5bn (25.7bn) in 2008, with about half coming from pharmaceutical products.

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Kraft is widely rumoured to be preparing to increase its hostile bid for Cadbury in an effort to win over shareholders.

The US maker of Dairylea and Oreo cookies is said to have set a deadline of today for its present cash-and-shares offer, which has been dismissed by Cadbury as a "derisory offer". Analysts believe Kraft will need to pay 820-850p to win Cadbury.

Kraft has until January 19 to up its bid, after which it can make a higher offer only if a rival takeover bid is made by another suitor.