Nestle sells most of Jenny Craig in slimming drive

Reuters

* North Castle Partners buys Jenny Craig for undisclosed sum

* Sale part of Nestle plan to shed underperforming brands

* Buyer to combine Jenny Craig with Curves fitness chain

* Nestle shares up 0.5 pct

By Martinne Geller and Silke Koltrowitz

LONDON/ZURICH, Nov 7 (Reuters) - Nestle, theworld's largest food group, is selling the bulk of its JennyCraig weight-loss business to a U.S. private equity firm, partof a trend among consumer goods firms to shed underperformingbusinesses in a faltering global economy.

The Swiss group said on Thursday it was selling the JennyCraig business in North America and Oceania to North CastlePartners for an undisclosed sum, which analysts said was likelyto be below the $600 million Nestle paid for it in 2006.

"It is a sign the company is carrying through with itscommitment to weed out duds if they can't be turned around,"said Jon Cox, an analyst at brokerage Kepler Cheuvreux inZurich, who welcomed the deal.

Despite a worsening obesity epidemic in the United States,weight-loss programme providers such as Jenny Craig, WeightWatchers International and Medifast Inc havebeen hit hard by weak economies and competition from a host ofelectronic apps that count calories for free.

Earlier this week, Medifast forecast weaker-than-expectedfull-year sales, while Weight Watchers said last month revenuethis quarter would fall by a low double-digit percentage.

Reuters reported last month that Nestle was looking to sellJenny Craig, which makes packaged food and gives weight lossadvice.

Nestle boss Paul Bulcke also told investors last month therewould be disposals, though he did not give names. "We want to bein business, not in agony," he said.

Nestle bought Jenny Craig from private equity groups ACICapital and MidOcean Partners as part of a push into nutritionthat has also seen the maker of KitKat and Crunch bars expandinto baby food and sports nutrition.

But several of its brands, including PowerBar energy bars,have failed to take off, and Nestle has posted lacklustreresults in recent quarters. Reuters reported in September thatit was seeking to unload PowerBar as well.

Several consumer goods groups are pruning their portfoliosas faltering economies have made trading more difficultworldwide. Unilever recently sold its Skippy peanutbutter and Wishbone salad dressings, Campbell Soup Co sold its European business and Reckitt Benckiser isexploring options for its pharmaceuticals business.

GROWING WITH THE TIMES

When Nestle bought Jenny Craig, which was founded in 1983 byan Australian of the same name together with her husband Sid, ithad annual sales of $400 million and was growing at adouble-digit percentage with 3,000 employees and 600 centres,according to analysts at Vontobel.

"With the economic crisis, sales started to stumble,"Vontobel said in a research note, estimating current year salesat around 300 million Swiss francs ($329 million). "The brandwas loss-making and has been destroying value for years."

Nestle hasn't provided any recent figures.

Jenny Craig's new owner, based in Greenwich, Connecticut,focuses exclusively on health and wellness businesses and iscredited with turning around Atkins Nutritionals after buying itfrom its post-bankruptcy lenders in 2007.

The executive whom North Castle had running Atkins, MontySharma, will run Jenny Craig together with the CurvesInternational fitness club chain he runs now.

In addition to benefits from the combination, North CastleManaging Director Jon Canarick expects to build on Jenny Craig'sbrand recognition in the United States and Australia.

"We believe we can tailor the marketing more specificallytoward what Jenny Craig is great at, which is one-on-oneconsultation and food," he said in an interview.

He declined to provide any financial details.

North Castle expects the deal to close this month. Thesmaller Jenny Craig business in France is not part of the deal.

Nestle shares closed up 0.5 percent at 66.2 Swiss francs.

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