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News > Deals
Heinz ends Beech-Nut bid
April 27, 2001: 1:00 p.m. ET

Appeals Court ruling scuttles $185M merger of No.2 and No.3 baby food makers
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NEW YORK (CNNfn) - H.J. Heinz Co. terminated its $185 million takeover of the maker of Beech-Nut baby food Friday after a court ruling scuttled the deal on antitrust grounds.

The U.S. Court of Appeals for the District of Columbia ruled that Heinz's proposed merger with Milnot Holding Corp., the No. 3 baby food producer, should not be allowed to proceed due to competitive issues.

The appellate court overturned a District Court ruling that rejected an attempt by the Federal Trade Commission to block the merger. The District Court had sided with the companies that a merger would enhance competition.

The Court of Appeals said the FTC raised serious questions that were not answered.

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(photo: BeechNut)
 
"The FTC demonstrated that the merger to duoply will increase the concentration in an already highly concentrated market; that entry barriers in the market make it unlikely that any anticompetitive effects will be avoided; that pre-merger competition is vigorous at the wholesale level nationwide; and that post-merger competition may be lessened substantially," the appellate court said.

As a result of the ruling, both companies decided to end the merger. Heinz (HNZ: up $0.16 to $39.03, Research, Estimates) the No. 2 U.S. baby food maker, said it will re-evaluate its U.S. infant feeding strategy in light of the court decision.

The No. 1 U.S. baby food maker is Gerber, a unit of the Swiss company Novartis (NVS: down $0.51 to $39.25, Research, Estimates).

Pittsburgh-based Heinz -- which owns Nine Lives cat food, Starkist tuna and Ore-Ida frozen foods -- announced the merger in February 2000. Combined, the two firms would have had 24 percent of the U.S. baby food market, with Gerber holding on to 73 percent. At that time, St. Louis-based Milnot sold $150 million in Beech-Nut baby food a year.

The merger has since been at the mercy of federal regulators. Last October, a Federal District Court ruled it would not be in the public interest to grant a temporary injunction requested by the FTC. The regulators then sought relief with the appellate court.

"Infant feeding is a billion-dollar global business for Heinz, which has number-one brands in Canada, the UK, Italy, Australia, New Zealand and China," said Heinz CEO William Johnson in a statement Friday. graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.