Quaker Oats Stock Boils Over on Takeover Talk

Quaker Oats Co., maker of popular products ranging from oatmeal to Gatorade, was rumored Friday to be a takeover target of Nestle, and the talk sent its stock to a 12-month high.

Shares in the Chicago-based company closed $7.25 higher at $78.625 on the New York Stock Exchange.

A Quaker Oats spokesman could not be reached for comment. Quaker Oats declined to comment on its stock activity, according to a statement from the NYSE.

“The company stated that its policy is not to comment on unusual market activity or rumors,” the exchange said.

Officials of Swiss food giant Nestle also could not be reached for comment.

Journalist Dan Dorfman reported the rumors on CNBC-TV.

“Quaker is often mentioned as a possible takeover target,” said analyst Ellen Baras of credit agency Duff & Phelps Inc.

“The whole company is very well put together, so who knows,” said Jack Maxwell, analyst with Wheat First Butcher & Singer.

What is not clear, however, is whether Nestle would be the likely buyer, said Joanna Scharf of S.G. Warburg Securities.

“It seems unlikely that Nestle would wish to invest in a U.S. cereal company, given its international cereal partnership with General Mills Inc.,” Scharf said.

The partnership, Cereal Partners Worldwide, is marketing cereals in Europe and has begun to enter new markets, such as Mexico.

But Nestle is said to be cash-rich and seeking an acquisition after Gerber, the largest U.S. baby food maker, accepted a $3.7-billion bid from Sandoz, the Swiss pharmaceuticals and chemicals group, earlier this month.

That deal has spurred merger talk and subsequent stock run-ups within the food industry.

An alliance with a large conglomerate such as Nestle could help Quaker Oats expand marketing of its Gatorade sports beverage, analysts said.

“Gatorade has had trouble getting distribution they need in some markets,” Baras said. The sports drink had sales of $750 million in the United States and Canada last year.

Quaker, which makes Cap’n Crunch cereal, is a small player in the $8-billion-a-year ready-to-eat cereal market, lagging leader Kellogg Co. and second-place General Mills.

However, Quaker dominates the hot-cereal market with its Quaker Oats oatmeal.

Its other well-known products include Rice A Roni and Aunt Jemima pancake mix.