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7 June, 2006 - 09:11 By Staff Reporter

A nappy deal as Philips gets baby food firm for £460m

Dutch electronics giant Philips says it has no plans to reduce the 600 headcount at the Suffolk factory it intends to acquire from Charter-house Capital Partners as part of a £460 million purchase of local baby-food accessory provider, Cannon AVENT.Dutch electronics giant Philips says it has no plans to reduce the 600 headcount at the Suffolk factory it intends to acquire from Charter-house Capital Partners as part of a £460 million purchase of local baby-food accessory provider, Cannon AVENT.

The £20m Glemsford facility is the centre for the design and manufacture of 90 per cent of all Cannon AVENT’s products.

The proposed all-cash transaction is expected to close in the third quarter of 2006 following regulatory approval. AVENT will then be integrated into Philips’ Domestic Appliances and Personal Care division with all AVENT’s management team moving across.

A spokesman for the Dutch firm said that Philips intended to "get involved" in the electronics side of the firm, which represents around 30 per cent of AVENT’s business, adding that the opportunity to expand within this market and improve efficiencies through scale-up in Suffolk was one of the major benefits of the purchase.

Elisabeth Christie, AVENT chief executive, said: "When it comes to the health and wellbeing of mothers and infants, both our companies put the consumer first.

"We also both recognise that through strong consumer insights and premium products, we can achieve a leading position in the market. We look forward to working with a global leader in electronics, to continue bringing out innovative mother and baby care products."

Andrea Ragnetti, chief executive of Philips Domestic Appliances and Personal Care division, said: "Through this acquisition, we can build on Philips’ leading position in Europe in baby monitors to become a leading provider of products in this market.

"We view the health and wellbeing of mothers and infants as a key future market for Philips.

"AVENT is recognised as a premium mother and baby care brand, while Philips’ brand is strongly associated with healthcare and advanced electronics designed around the consumer. Together, we see an excellent opportunity for emerging as a strong player in this growing market."

Valued at around £5bn, the addressable market in mother and baby care products is expected over the next five years to grow on average per year by approximately five per cent in developed markets and 10 per cent in emerging markets.

In developed markets, the trend toward an ageing population with a greater number of grandparents and older first time parents is resulting in higher spending per baby.

In emerging markets, such as China, per capita spending on baby care products is also rising due to increased wealth and a higher portion of disposable income spent on infants and children.

For the 12 months ending March 2006, AVENT reported sales of approximately £113m, representing a growth of 12 per cent over the previous year, and an operating margin of 22 per cent.

Philips anticipates the acquisition to be accretive to margins from 2007 onwards. Over the next five years it is expected that sales growth will significantly outpace the market.

Philips will combine AVENT’s well-established position in the UK and US markets and premium mother and baby care consumer brand with Philips’ extensive global reach, to expand AVENT’s activities, pushing into Asia in particular.

Founded in 1984, AVENT manufactures bottle, breast and toddler feeding products. The company is the market leader in the UK and is among the top three manufacturers in its category in the US and has sales in over 60 countries.

As well as its market leading position, AVENT has a reputation for technological innovation having introduced the first steam steriliser, first single handed breast pump, the first breast pump to imitate a baby’s suckling action and the first and only feeding bottle to be clinically proven to reduce colic.

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