Nestle to Buy PowerBar

Updated from 7:49 a.m. EST

Nestle USA, a unit of Nestle (NSRGY Quote), said on Wednesday that it has agreed to buy closely held PowerBar, the manufacturer of energy and nutrition bars, for an undisclosed amount.

Nestle will also buy the company's two subsidiaries, Toronto-based PowerBar Foods Canada and Munich-based PowerBar Europe.

The Swiss food company -- known more for its Nestle Crunch, KitKat and Baby Ruth candy bars -- said the transaction "demonstrates Nestle's commitment to health and nutrition and will provide opportunities for significant incremental growth in the fast-growing nutrition sector."

Shares of Nestle, based in Vevey, Switzerland, closed up 19, or 1%, to 2781 Swiss francs on the Swiss bourse. At the close of trading Tuesday on the Nasdaq, they were up 2 3/8, or 3%, to 85 3/4. They finished Wednesday unchanged at 85 3/4.

PowerBar, based in Berkeley, Calif., racked up sales of over $135 million in 1999.

"From a strategic standpoint, we've had some aggressive goals such as growing by 30% a year," Brian Maxwell, the founder, chief executive and president of PowerBar, said in an interview. "We've been growing very rapidly recently. We saw there were opportunities out there to grow into a $1 billion-$2 billion business, but we needed the resources of a global partner."

Nestle's distribution capability will be a huge boon for PowerBar. "As an independent company, distribution and getting on the shelf is a challenge. We have limited distribution in convenience stores but outsell in dollar volume products that are distributed twice as much as we are," Maxwell added. "Nestle will get us into those distribution channels."

Maxwell said PowerBar gave presentations to nine companies in total and that negotiations with Nestle took "several weeks." He will stay on as the "spokesman for the brand" (though his title is yet to be determined) and likened the acquisition to "an adolescent child tapped for Olympic potential. You're a little sad but wish it the best." Maxwell is a former Canadian Olympic marathon runner.

The more established food companies are all seeking ways to enter the health food market, an area that enjoys higher growth of 30% a year. Witness Kraft Food's recent purchases of PowerBar rival Balance Bar (BBAR Quote) and privately held Boca Burger, a maker of soy-based foods; General Mills' (GIS Quote) agreement to buy organic food product maker Small Planet Foods; and Kellogg's (K Quote) purchase of Worthington Foods, which makes soy-based vegetarian items.