Nestle has selected a consortium led by the private equity firm EQT for exclusive talks to buy its skin health business in an agreement that could be worth up to 10,000 million dollars.
The decision marked a fiercely competitive auctioning process in which KKR's rival private equity firm and another consortium led by Advent International and Cinven also made offers for the division, according to the people. Unilever and Colgate-Palmolive also considered offers for the consumer's part of the business, which includes Cetaphil cleansers and lotions and Proactiv car treatments.
Nestlé is selling the skin health unit as part of the efforts of Chief Executive Officer of Mark Schneider to streamline the world's largest manufacturer of food products to focus on the businesses that grow the most: coffee, water, the care of pets and the nutritional science. The Swiss-based company said in September that the business was "increasingly beyond the strategic reach of the group," as it promised to examine a sale or a spin off.
Sweden's EQT offer, supported by the Abu Dhabi Investment Authority, among others, is that the acquisition funds are willing to implement the record capital amounts that have been generated. EQT is also exploring a possible listing in Stockholm, with the agreement of Nestlé prone to raise the profile of the group among investors.
If successful, it is likely that the purchase is one of the most important transactions in Europe for private equity groups this year.
People familiar with the debates warned that the selection of the EQT by Nestlé did not guarantee an agreement and that the talks could still end.
Nestlé, EQT, KKR and Advent refused to comment. Cinven was not immediately available for comment.
The possible divestiture represents a break with the past for Nestlé, which, until 2014, was giving additional capital to the skin health business under the predecessor of Mr. Schneider and now the group's president, Paul Bulcke.
The business was initially operated under the name of Galderma, a Swiss dermatology group that Nestlé had previously participated with L & O; Oréal. Nestlé assumed full control in exchange for its shares of the French cosmetic company, which represented an amount of 2.6 million euros.
The skin health business is composed of two main product areas, consumer and medical solutions. It had annual sales of 2.7 trillion US dollars (2.7 million dollars) in 2017, according to business reports, which account for around 3% of Nestlé's annual sales. Consumption products accounted for 41 percent of sales, while the dermal pads, which include stretching wrinkles, accounted for 35 percent. The treatments for acne, psoriasis and rosacea recipes generated 24%.
Since he assumed the position of chief executive at the beginning of 2017, Mr. Schneider has made a number of active sales to get rid of lower growth peripheral businesses, including Gerber's life insurance products and baby foods in the United States. Nestlé recently announced that it wanted to sell its Herta sausage business, as consumers are increasingly changing to meat-based alternatives.
Nestlé shares closed Wednesday by 1.3 percent, which increased this year to 21.5 percent, compared to an increase of 13.8 percent for the MSCI Europe Consumer Staples index.