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Market Update

Feeding Frenzy among Food Makers Fuels Funds

Consolidation helps some funds with big food industry weightings.

Swiss food conglomerate Nestle's (NSRGY) decision to get frisky with venerable pet-food giant Ralston Purina (RAL) continues a consolidation binge in the industry that has helped boost the fortunes of funds with big helpings of food makers in their portfolios.

Nestle, a maker of chocolate bars and wet, canned pet food, on Tuesday confirmed it will buy Ralston Purina for about $33.50 per share, or $10.3 billion, in a bid to become the big dog of the pet-food business. The deal will join Nestle's Alpo and Friskies brands with Ralston's Purina products, resulting in combined yearly sales of $6.3 billion. Nestle is paying a 36% premium over Ralston's Friday closing price, which looks somewhat pricey to stock analyst Aaron Westrate.