Ice Cream Accord

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Ice Cream Accord

NEW YORK -- Nestle SA said it will fold its ice cream business into Dreyer's Grand Ice Cream, Inc. in return for majority control of the U.S. company. The deal should significantly boost Dreyer's clout in the non-grocery distribution business with ice-cream novelties from Switzerland's Nestle, the world's biggest food-and-beverage company.

"We've been getting into this late in life," Dreyer's Chief Executive T. Gary Rogers said of the non-grocery distribution business. "Now we become the No. 2 novelty player."

The multibillion, cash-and-stock deal may result in Nestle taking full control of Oakland, Calif.-based Dreyer's starting in 2006. Rogers said it is "an unusual transaction" because its price is based on Dreyer's goal of earning $3 a share in 2005, a goal he called aggressive, Reuters reported.

Under the agreement, which requires approvals of shareholders and regulators, Nestle will increase its stake in Dryer's to 67 percent from 23 percent. Dryer's expects the deal to close before the end of the year.

The part of the transaction that would have Nestle taking full control of Dreyer's would be valued at about $2.5 billion, Francois-Xavier Perroud, a spokesman for the Swiss company said.

Under the plan, Dreyer minority shareholders have an option to sell the remaining shares to Nestle for $83 each from January 2006 to mid- May 2006 . Should Nestle fail to take full control of Dreyer during that period, it has an option to buy the remaining Dreyer stock for $88 each, the report said.

The deal will result in cost cuts of around $170 million annually, Nestle added.