The transaction is expected to result in a 50/50 joint venture with R&R, which is owned by French private equity firm PAI, sources said yesterday, noting it could be announced as early as this week.
The venture would include Nestle’s global ice cream operations outside of Israel and the US.
Credit Suisse is advising Nestle, while PAI is being advised by Rothschild, said the source. Nestle and Credit Suisse declined to comment.
R&R, PAI and Rothschild did not immediately respond to requests for comment.
A deal is not certain, but if the venture goes ahead, the plan is for PAI to exit in a few years’ time and for Nestle to list the business, said the source.
R&R’s ice cream brands range from Cadbury Flake Cones to Rowntree’s Fruit Pastille lollies to Kelly’s Cornish ice cream. PAI purchased R&R in 2013 from Oaktree Capital Management for around €850m.
Private equity firms typically aim to own businesses for four to six years.
The Swiss-based giant’s ice cream business provides about $4bn of its roughly $94bn in annual revenue, and includes its own brand Nestle and Movenpick.
Nestle’s ice cream operations in the US, the world’s largest ice cream market, include brands such as Edy’s and Dryer’s, but will be excluded from the venture.
Nestle and rival Unilever control about a third of the $67bn global ice cream market, but changing tastes have increased competition and opened up the ice cream market to smaller players.
Last week, Unilever agreed to buy Italian high-end ice cream maker Grom. Nestle oversees a sprawling portfolio including Gerber baby food, Nescafe coffee, KitKat bars, and Purina pet food.
Recent economic weakness around the world has clipped its growth rate, although its size and diversification has helped it weather the storm better than some rivals.
Still, Nestle, like its peers Unilever and Procter & Gamble, has been reviewing its portfolio.
Over the past two years, it has parted with most of its Jenny Craig diet food business, Power Bar snacks, Juicy Juice drink in the US, its frozen food business in Spain, and its ice cream business in South Africa.
UK-based R&R, Europe’s largest private-label ice cream maker, agreed to buy Nestle’s South African ice cream business earlier this year.
R&R had adjusted core earnings of €158.7m in the 12 months to the end of last March.