PARIS (Standard&Poor's) April 13, 2007--Standard&Poor's Ratings Services said today that its ratings and outlook on Switzerland-based global food group Nestlé S.A. (AAA/Stable/A-1+) are unchanged, following the announcement that Nestlé has agreed to acquire U.S.-based group Gerber, the baby food subsidiary of Novartis AG (AAA/Stable/A-1+), for a cash consideration of $5.5 billion. This transaction will weaken the group's financial profile. Notably, the adjusted funds from operations (FFO)-to-debt ratio will fall below 90%, which is the minimum level commensurate with Nestlé's 'AAA' rating. Nevertheless, Nestle is committed to restore the 90% threshold by 2008, which is easily achievable if the group's huge discretionary cash flows are primarily used for debt reduction. Failure to meet this commitment would clearly
