Mergers And Acquisitions Of Nestle Accounting Essay


Nestle is a flat organisation with few levels of management and span of control. It was founded in 1866 by Henri Nestlé at VeVey (Switzerland). Currently Nestle` is one of the worlds largest Nutrition, health and wellness company around the Globe and committed to provide the best Nutritional food products. Moreover, currently Nestle has 456 factories in 83 different countries and its products are sold more than 140 countries in the world. In order to ensure company long term sustainable growth, Company constantly reviews its product portfolio and focuses on its efforts. Also better understand the need of customer, nestle monitor consumer panels by conducting research. Consequencely, success of Nestle is a reflection of clear define responsibilities, reflection of professionalism, responsible attitude of management, well defined objective as well as significant global leadership position

Nestle Brands:

The Nestlé brand portfolio such as milk and dairy products, nutrition's, weight management, performance and healthcare, breakfast cereals, ice cream, coffee and culinary products (prepared dishes, cooking aids, sauces) pet care, bottled water etc. practically cover all food and beverage categories. Many of them have leadership both locally and globally market and existed for several years, for instance S.Pellegrino the mineral water from Italy and Nestlé Moça in Brazil, are over 100 years old. The best-known global brands include Nescafé, Nestea, Maggi, Buitoni, Purina and Nestlé itself other brands also sell in many countries for instance Milo, Nespresso, Nesquik, Kit Kat, Smarties, Polo, Friskies, Perrier and Vittel. It is considered that total number of brands including local and international reaches into several thousands.



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1866 Company Founded

1905 Nestle Merger with Anglo-Swiss Condensed Milk Company

1929 Nestle Merger with Peter, Cailler, and Kohler Chocolates Suisse's S.A.

1947 Nestle Merger with Alimentana S.A. (Maggi)

1971 Nestle Merge with Merger with Ursina-Franck1974L'Oréal (equity interest)

1977 Nestle Acquire Alcon (2002: partial IPO)

1985 Nestle Acquire Carnation

1988 Nestle Acquire Buitoni-Perugina

1988 Nestle Acquire Rowntree

1992 Nestle Acquire Perrier

1998 Nestle Acquire San Pellegrino and Spillers Pet foods

2000 Nestle Acquire Power Bar

2001 Nestle Acquire Ralston Purina

2002 Nestle Acquire Schöller and Chef America

2003 Nestle Acquire of Mövenpick, Powwow and Dreyer's

2004 Nestle Acquire Valio (ice cream)

2005 Nestle Acquire Wagner, Protéika, Musashi

2007   Novartis Medical Nutrition, Gerber and Henniez

2009   Vitality Beverage business

2010   Nestle Acquire Kraft Pizza


Key Dates

1974 L'Oréal

1981 Galderma - (joint venture with L'Oréal)

1990 Nestle Joint Venture with General Mills (Cereal Partners world wide)

1991 Nestle Joint Venture with Coca Cola (formerly CCNR) Beverage Partners Worldwide

2002 Nestle Joint Venture with Fonterra (Dairy Partners Americas)

Nestlé Corporate Governance

The companies' governance bodies are

Board of Directors (Board)

Chairman and Corporate Governance Committee (CCGC)

Compensation Committee (CC)

Nomination committee (NC)

Audit Committee (AC)

Chairman of the Board

Chief Executives Officer (CEO)

Executive Board (EB)

Board of Directors (Board)

According to the company Article of Associations 2009 Article 14 & 15 Number of Directors and Term of office The Board of Directors shall consist of at least seven members also board shall be elected for a three years by the General Meeting. Furthermore each year board renewed by rotation also board will establish new order of rotation in the case of increase or decrease of board of director.

The board Members are:


Two Voice Chairmen

Chief Executive officer (CEO)

Members of the Committee

Role of the Board and its Committees

Assignments of Responsibilities and power

According to the company Article of Associations NO 16, 2009 .define board is responsible for the selection of chairman and voice chairmen also define board regulation and its assignment of responsibilities. Furthermore According to the company Article of Associations 2009 (No17 & 18), article defines the general power of board such as board can conduct business to the extent that is not within the board regulation or general meeting. Moreover board is responsible for

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Management and supervision of the business

The appointment and removal of the chairman and Voice chairmen

The appointment and removal of committee members

The appointment of CEO and members of Executive board (EU)

Preparation of Management report also preparation of General Meetings including agenda and proposal.

The company long term Strategy

Financial operation

Establish or close branch office


The Chairman and Corporate Governance Committee (CCGC)

This committee consists of Chairmen, Two voice chairmen, Chief executive officer and elected member of the board. Furthermore, committee liaises between board and chairman. The board approved power and duties for (CCGC) and particularly (CCGC) acts as a consoler and solve the management issue between chairman and chief executive officer.

The Compensation Committee (CC)

This committee consists of minimum two non executive members of the board and chief executive officer; furthermore CC recommends compensation policy to the board and also proposes the remuneration system and principals for approvals.

The Nomination Committee (NC)

This committee consists of independent and non executive members of the board preferably not the member of (CCGC) committee, furthermore this committee establish principal to select candidate for board of director also prepare proposal for board decision.

The Audit Committee (AC)

This committee consists of minimum two non executive members of the board and voice chairmen who control the committee, furthermore majority of the members are independent and at least one member have financial expertise. Moreover the responsibly of AC is to assists the Board to fulfill its responsibilities with respect to financial and accounting reporting process also overview of risk management as well as internal and external audit process also unrestricted approach to the company's record .

Chairman of the Board

The chairman is responsible to supervise the board (subject to the power of board) and management of the company governance. Chairman responsibilities are

Leads the Board

Overall responsibility for the development of strategy (together with CEO)

Appointment and removal of proposal shareholder and executive management

To ensure the alignment of board's strategy and board committee

To ensure the proper flow of information

In coordination with CEO, Responsible to organise and chair the board meeting

Responsible to organise and chair the General Meeting

Work close to nomination committee (assessment of board of director nomination)

Takes a leading role to design the group corporate governance

The Chief executive officer

The chief executive officer is considered the supreme executive authority for the company and the Group's (subject to the power reserved to the board) the committee and the chairman,

Subject to the power and duties CEO has following duties and powers

Organise, manage and monitor the business affairs

To approve, acquisitions, participations, investment and divestitures

In coordination with chairman, submit proposal to the board for the nomination or dismissal

To call and chair the meetings of Executive board

Shall report to chairman

The vice Chairmen

The board shall appoint two independent directors as vice chairmen, responsibilities of vice chairmen to work close to the chairmen and discuss industrial, strategic marketing, internal control as well as financial issue. Furthermore, one of them should be have financial expertise to ensure the good internal financial control and second should have industrial experience on the global level

Code of Business Conduct

The Nestlé Code of Business Conduct helps the continued implementation of the Corporate Business Principles and the nature of this Code are designed to provide a frame of reference against all possible situations that may occur. Moreover the purpose of this code is to Employees should seek guidance when they are in doubt situation, act legally and honestly and avoid all those conduct which may damage Nestle reputation also give preference to Company's interests instead of personal or other interests.

Compliance with laws, rules and regulations

Conflicts of Interest

Outside directorships and other outside activities

Families and Relatives

Corporate opportunities

Insider trading

Antitrust and fair dealing

Confidential information

Fraud, protection of company assets, accounting

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Bribery and corruption

Gifts, meals, entertainment

Discrimination and harassment

Failure to comply

Reporting illegal or non-compliant conduct


Corporate Business Principles (International)

Nestle is committed to create value over the long term not only for shareholders, but also for all those communities around the world where Nestle market there products. moreover Nestle corporate business principles for instance human right, child labor and environment protection also consumer communication principal are based on fairness, honesty and sound human values also to follow local legislation, religious practices and culture, Therefore, company respect and follow all applicable local laws around the world. Nestle objective is to market and manufacture the products such a way to create long term value for business partner, shareholders, consumers, and employees, to ensure the highest standard of organisation Furthermore nestle corporate business principle translated into 40 different languages.

Nestlé Management is committed to the following Business Principles in all countries

Manage professional skills,

Curiosity and open-mindedness

High level of interest in other cultures,

Commitment to continuous learning, improving, and sharing knowledge, Motivate staff in order to contribute wider group performance

Willing to take risks and maintain composure under pressure

Involvement of each employee at all levels (concerned with continuously adding value to company)

Nestle Group sales, profitability and financial position

In 2009 consolidated

In millions of CHF

Sales 107 618

EBIT (a) Group 15 699

as % of sales 14.6%

EBIT (a) (Food and Beverages) 13 083

as % of sales 13.1%

Net profit (b) 10 428

as % of sales 9.7%

Capital expenditure 4 641

as % of sales 4.3%

Equity attributable to shareholders of the parent 48 915

Market capitalisation, end December 174 294

Operating cash flow 17 934

Free cash flow (c) 12 369

Net debt 18 085

Ratio of the debt to equity (gearing) 37.0%

Over all cost of goods sold decreased by 110 basis points

Distribution costs fell by 40 basis points

Marketing and expenses rose by 110 basis points (equal 33.7% of total sale) Investment in R&D was up 10 basis points

(Appendix 2 : For detail sale chart by regions and products.)

Nestle Recent News

04-Jan-2010 Nestlé to sell remaining Alcon shares to Novartis.

05-Jan-2010 Nestlé opens global R&D Centre

05-Jan-2010 Nestlé to acquire Kraft Foods' frozen pizza business

04-Feb-2010 Nestlé France - Change of Management

02-Mar-2010 Nestlé completes acquisition of Kraft Foods' frozen pizza business

Mar-2010 Nestlé Bets on Mexican Coffee

15-Apr-2010 Strong support for Board proposals at Nestlé AGM.

(See appendix no 2 for detail)

Nestle share buy back Programme.

Nestle boards of Directors Continues to believe that significant share buy back Programme should help to drive the performance of food and beverage business and enhance the shareholder value, Therefore Nestle Board has announced share buy back Programme on 15 August 2007 for over the next three year subject to market conditions. The objective of this Programme was to improve capital efficiency and future prospects of food and beverage business. The Programme has been divided into two steps such as one of CHF 15 billion and one of CHF 10 billion.

Furthermore, due to acquisition of Novartis medical nutrition and Gerber has created a critical Mass in Nutrition sales approx CHF 10 Billion. On the contrary the total value of repurchased share from August 2007 to December 2009 is CHF20.1 As a consequence, in 2009 the group has brought back CHF 7 billion which is equal worth of its own shares and the remaining CHF 5 billion in share will brought back in the course of 2010. After completation of this Programme further group will launch a new CHF 10 billon share back Programme with intent to buy additional CHF 5 billion share before the end of the year.


Nestle and Greenpeace

Greenpeace organisation has started a campaign against Nestle over its purchase of palm oil by an Indonesian company called Sinar Mas. Greenpeace claims Sinar Mas getting the palm oil by destroying the rainforest and use in it for candy bars and other products. It is estimated of rainforests contributes about 20% of greenhouses gases also support transport sector. Therefore the excessive use of bio-fuels is a serious factor and deforestation of rainforests is one of the serious environmental issues on a global level. (

On contrast nestle chairman 000 explain Nestle is opposed to deforestation of rainforests in all over the world .Company will participate in the coalition of palm oil. Company has taken the following step regarding palm oil issue:

Company has stopped all purchase of palm oil from the Sinar Mas Company.

Company past purchase was limited to supplying our factories in Indonesia,

Now Company identified alternative suppliers from whom company purchase palm oil

Company made it clear in writing to suppliers of blended palm oil,

Now company is an active members of Roundtable on Sustainable Palm Oil,

Company pledged to source certified sustainable palm oil by 2015,

battle over the buffet


Appendix No 1:

Appendix 2 (News)

15-04-2010 Nestle Annual General Meeting

15-april-2010 Annual General Meeting held in VeVey (Switzerland),

2640 shareholders have attended the meeting.

The main points of meetings

Meeting has approved the annual reports and accounts.

Share holder further approved the proposed dividend increase to CHF 1.60 per share.

Re-elected board members, for three year)

Messrs. Peter Brabeck-Letmathe,

Steven G. Hoch

André Kudelski

Mr. Jean-René Fourtou, (due to the age limit set out in the Board)

New Elected Board (members for three year)

Ms Titia de Lange

Mr. Jean-Pierre Roth

Furthermore, chairman point out that Nestlé is working s towards to end deforestation of rainforests.

02-Mar-2010 Nestlé to acquire Kraft Foods' frozen pizza business

Nestle has showed the agree ness to acquired Kraft food frozen business in the US and Canada on 05-January, 2010 for USD 3.7 billion in cash, the reason for this acquisition is that US is the largest pizza market in the world about 37 billion USD and business includes brands California Pizza, DiGiorno, Tombstone, Jack's and Delissio, therefore this acquisition will provide a strong strategic pillar in the US and Canada where the company already established a leadership in dishes and hand held products such as Lean Cuisine, Buitoni, Lean Pockets, Stouffer's and Hot Pockets

Consequently on 01 March 2010 after completion of closing conditions Nestlé has concluded the acquisition of Kraft Foods' frozen pizza According to Paul Bulcke, CEO of Nestlé This acquisition bringing together a selection of great US and Canadian brands and also enhances Nestlé's frozen food activities in North America where Nestlé only had a minor presence until no

Mar-2010 Nestlé Bets on Mexican Coffee

Nestlé has announced plans to invest (US$390mn) in Mexican production and infrastructure facilities. The investment will be directed Nescafe instant coffee processing plant to expand the capacity by 40% which will make it the world's largest coffee processing plant, due to low production cost and vast network of trade Nestle is planning to build Mexico as a regional export hub

05-Jan-2010Nestlé opens global R&D Centre to develop new generation of biscuits

On 05-Jan-2010 Nestlé has open a Global R&D Center in Santiago de Chile. The New R&D Center will help to reduce the sugar and fat level in biscuits also it will include bioactive ingredients and more lighter without compromising the biscuit quality to improve health quality

05-Jan-2010 Nestlé opens global R&D Centre to develop new generation of biscuits

On 05-Jan-2010 Nestlé has open a Global R&D Center in Santiago de Chile. The New R&D Center will help to reduce the sugar and fat level in biscuits also it will include bioactive ingredients and more lighter without compromising the biscuit quality to improve health quality

04-Jan-2010 Nestlé to sell remaining Alcon shares to Novartis

04 Jan 2010 Nestlé S.A. has transfer the Alcon remaining 156,076,263 shares representing around 52% of the company's issued and outstanding share to Novartis, accordance with the contract agreed on 6 April 2008.Moreover, the reason for transfer the control are gradually based on three issues for instance, the divestment of Alcon - the initial IPO of 23.25% in 2002, the sale of 24.8% in 2008 and the exercise of the call option by Novartis. Alcon was acquired by Nestlé in 1977 for USD 280 million

Appendix 3 Sale forecast Sale and EBIT Margin by operating segments

Sales and EBIT Margin by Products.