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Nestlé has encountered some obstacles during its current spending spree. In July the Federal Trade Commission blocked the Swiss firm's $515 million takeover of CooperVision, a California contact-lens company. Reason: Nestlé already sells certain types of eye-care supplies through a Fort Worth subsidiary, Alcon Laboratories. There has been speculation that the FTC might oppose the creation of a food combine the size of Nestlé and Carnation. Experts close to the deal, however, expect little difficulty because the companies do not have significant competing products. Nestlé sells no milk in the U.S., and Carnation sells no coffee.
The Nestlé-Carnation deal continues a streak of mergers in the competitive food industry. Last month Chicago's Beatrice (Tropicana, La Choy) bought Esmark (Swift, Peter Pan) for $2.8 billion. Two weeks ago, Ralston Purina agreed to acquire ITT's Continental Baking division for $475 million. One reason for the takeovers is that business has turned sluggish as a result of the slowdown in U.S. population growth. Thus the easiest way for food companies to grow is to take over other firms. And as the Carnation purchase indicated, cows that are too contented may find themselves on the auction block.