Nestle Scoops Up Dreyer’s

Nestle on Monday reached a deal to take a majority stake in Dreyer’s Grand Ice Cream Inc. as part of a $2.4-billion transaction that would allow the Swiss conglomerate to eventually swallow all of Oakland-based Dreyer’s.

The combination will bring together Dreyer’s ice cream brands, the bestselling in the United States, with Nestle’s Haagen Dazs, and close the gap with global leader Anglo-Dutch group Unilever. Unilever’s brands include Ben & Jerry’s, Good Humor and Breyer’s.

News of the deal sent Dreyer’s stock surging $24.50, or 57%, to $67.29 on Nasdaq.

“This move underscores our commitment to growing and improving our ice cream business ... in the world’s highest per capita consumption market, the USA,” said Peter Brabeck, chief executive of Nestle.

Nestle, whose ice cream brands include Drumstick and Nestle Crunch, acquired U.S.-based Haagen-Dazs this year.

Nestle would initially receive 55 million newly issued Dreyer’s shares, boosting its stake to a majority 67% from its 23% holding. The 55 million Dreyer’s shares were worth $2.35 billion at Friday’s closing share price of $42.79.

Then, in 2006, Dreyer’s shareholders could sell their stock to Nestle for $83.

The following year, Nestle has the option of scooping up all outstanding Dreyer’s shares for $88 a share.

Dreyer’s Chairman and Chief Executive T. Gary Rogers will lead the combined businesses from Dreyer’s home base in Oakland. President William Cronk will retire once the deal is completed, Dreyer’s said.

Rogers and Cronk bought Dreyer’s for $1.1 million in 1977, when the company was operating mainly in California. The former fraternity brothers at UC Berkeley are credited with taking Dreyer’s nationwide and increasing annual sales more than 200 times. Shares of Dreyers were first sold to the public in 1981.

Dreyer’s was founded in 1928 by William Dreyer and Joseph Edy as an ice cream parlor in Oakland. It invented Rocky Road ice cream a year later.

Rogers holds about 8% of Dreyer’s and Cronk owns about 3.7%, according to Bloomberg News data. If they sell their shares in 2006, Rogers and Cronk will net $231.5 million and $107.9 million, respectively, based on their current holdings.

Rogers said it was too early to tell whether any job cuts will result from the merger.

The new Nestle business will control about 17% of the $25-billion worldwide market in ice cream, up from Nestle’s 13% and matching Unilever.

The Dreyer’s deal gives Nestle access to a prized distribution system that delivers ice cream from manufacturing plants to stores without using warehouses.

The deal, expected to result in cost savings of about $170 million annually by 2005, is expected to close by the end of the year.