Lemonheads owner Ferrara eyes Nestle’s candy business

Ferrara Candy Co., the owner of candies such as Lemonheads and Now & Later chews, is preparing to participate in the auction for Swiss food group Nestle SA’s US candy business, people familiar with the matter said on Friday.

A potential deal would add chocolate brands such as Butterfinger and Baby Ruth to Ferrara's array of gum and soft-candy offerings.

Nestle said in June it would explore strategic options, including a possible sale, for its US candy business, whose brands also include Nips, SweeTarts and Raisinets. Analysts at Jefferies peg its value at between $1.5 billion and $2 billion.

Nestle, the world's largest packaged foods maker, has been acting to shed underperforming businesses. US activist shareholder Third Point, which has a $3.5-billion stake in the company, is pressuring Nestle to boost returns as demand for its products weakens.

The business for sale has annual sales of 900 million Swiss francs ($923 million). It is the No. 4 player in the USchocolate and candy industry market, behind Hershey Co., Mars Inc. and Lindt, according to Bernstein Research.

Ferrara and its private equity owner, L Catterton, declined to comment. Nestle did not immediately respond to a request for comment.

Oakbrook Terrace, Illinoisbased Ferrara's origins date back to 1908 when Salvatore Ferrara started selling Italian pastries and sugar-coated candy almonds.