Nestle, FTC Said to Reach Dreyer’s Deal

Swiss food giant Nestle has reached an agreement with U.S. antitrust regulators that should allow it to complete a $2.8-billion acquisition of Oakland-based Dreyer’s Grand Ice Cream Inc. as early as next week, according to sources familiar with the deal.

The two companies signed an agreement late last week to sell three of Dreyer’s “super-premium” brands -- Dreamery, Whole Fruit sorbet and Godiva -- to Eskimo Pie maker CoolBrands International Inc. of Ontario, Canada. CoolBrands also will take over eight markets in Dreyer’s distribution network, which delivers ice cream for rival companies.

The deal also requires Nestle to dissolve a Dreyer’s joint venture with Mars Inc. that makes Mars brand ice cream flavored with Snickers, M&Ms; and other candy -- a move regulators believed would encourage Mars to launch its own super-premium ice cream brand, sources said.

The agreement, which has the support of lawyers at the Federal Trade Commission, still requires approval by members of the commission, which voted 5-0 in March to block the acquisition on concerns that the deal would hurt competition and drive up the price of gourmet ice cream such as Nestle’s Haagen-Dazs.

Although that vote could be two weeks away, investors and analysts think the deal will be cleared by Monday when Nestle’s contract to acquire two-thirds of Dreyer’s shares expires. Dreyer’s is the nation’s largest ice cream maker, with $1.4 billion in annual sales.

“The market is viewing this as a done deal at this point,” said Peter Schoenfeld, chairman and chief executive of P. Schoenfeld Asset Management, a risk-arbitrage firm in New York, which held 121,583 Dreyer’s shares as of March 3. Investors are “not anticipating much risk of this deal being blown away,” he said.

Indeed, it is likely that the two companies will extend the contract, now that they have the support of the FTC attorneys as well as shareholders, said Tom Burnett, president of Merger Insight, an affiliate of brokerage firm Wall Street Access.

Burnett noted, however, that there is a small chance that if the contract expires, Nestle could try to negotiate a lower price for Dreyer’s shares, given the larger-than-expected concessions it made to satisfy regulators. Nestle “might want to cut the price to pay for the extra divestitures,” he said.

Executives with Nestle USA, which is based in Glendale, declined to comment on the deal, as did FTC officials.

Dreyer’s and CoolBrands could not be reached for comment.

Shares of Dreyer’s rose $1.31 to $78.03 on Nasdaq.

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Bloomberg News was used in compiling this report.