* Nestle will get N. America rights to skincare products
* Valeant says deal clears way for it to buy Allergan
(Adds more analyst comments, background)
By Martinne Geller and Alice Baghdjian
LONDON/ZURICH, May 28 Swiss food group Nestle
accelerated a push into the fast-growing skincare
market on Wednesday, buying the rights to several injectable
treatments for facial wrinkles and lines from Valeant
Pharmaceuticals International for $1.4 billion.
The world's biggest food group, with brands including KitKat
chocolate bars, Gerber baby food and Nescafe coffee, signalled
its ambitions in skin health products in February by taking over
the Galderma dermatology venture it had with L'Oreal.
Wednesday's move gives Nestle the North American rights to
some products taken on in that deal, boosting its control of the
brands and avoiding the situation with KitKat, to which rival
Hershey owns the rights in the United States.
For Quebec-based Valeant, the cash deal clears a potential
antitrust hurdle to its proposed $49 billion takeover of U.S.
rival Allergan Inc, which makes Botox, used to treat
conditions from frown lines to overactive bladder.
For Nestle, the deal marks the latest step in a march begun
almost two decades ago by Chairman and then-CEO Peter
Brabeck-Lemathe to transform the sweets company into a global
leader in nutrition, health and wellness, although some analysts
question whether cosmetic skin treatments fit into that
"They are trying to squeeze it under a wellness umbrella.
It's a stretch," said a European food analyst.
The world's biggest producers of packaged foods are moving
increasingly towards healthier food products or personal care
goods that offer faster sales growth and wider profit margins.
Citing data from GlobalData Facial Aesthetics, Vontobel
analysts said the U.S. market for Botox and other wrinkle
fillers was set to grow from $2.5 billion in 2013 to $4.7
billion in 2018 - compound annual growth of 13.5 percent.
"These figures speak for themselves and explain how
strategic the deal is for Nestle/Galderma," said the analysts,
who rate Nestle stock a "buy".
Nestle shares, which have performed just ahead of the FTSE
Eurofirst 300 Consumer Goods Index this year, were
up 0.4 percent at 69.85 Swiss francs by 1515 GMT.
Nestle said the deal with Valeant would give it the U.S. and
Canadian rights to sell the Restylane, Perlane and Emervel
injectable cosmetic treatments it already manufactures, as well
as Dysport, a cosmetic treatment owned by Ipsen.
It is also acquiring from Valeant a skin filler for cosmetic
and medical use called Sculptra.
Valeant, which inherited the North American rights in its
2012 acquisition of Medicis, said the deal fit with its plans.
It raised its bid for Allergan a few hours after announcing the
deal with Nestle.
"By selling it ahead of time we have eliminated one more
roadblock in terms of our integration with Allergan and we were
able to get a price that was more than five times sales, so we
think it also creates real shareholder value," said Valeant
Chief Executive Michael Pearson.
By comparison, Nestle paid 3.9 times sales to take over
Galderma. Valeant's earlier, spurned offer for Allergan was
worth 7.1 times sales.
Beside its new Skin Health division, Nestle has a unit
called Nestle Health Science that sells medical nutrition
products for people with specific dietary needs related to
illness or disease. It is also on a shortlist of bidders for the
medical nutrition business of Danone, valued at about
4 billion euros ($5.5 billion), sources have told Reuters.
Nestle Health Science is working as well to develop products
in gastrointestinal, metabolic and brain health.
"I can see the rationale behind that," said Berenberg Bank
analyst Fintan Ryan. "Nutrition and health is becoming more
important to consumers, so it's increasingly going to be a
bigger part of what Nestle does."
When it comes to the skin business, Ryan was more skeptical.
"I don't see this being the future of Nestle," he said.
(Additional reporting Ben Hirschler in London and Rod Nickel in
Winnipeg; Editing by Mark Potter and Tom Pfeiffer)