Kraft Foods sells European assets

Kraft's decision to divert some of its European trademarks aims to fulfill regulatory requirements set by the European Commission following Kraft's acquisition of Groupe Danone's global biscuit business, including LU Iberia and Gyori Keksz, in November 2007.

French food company Groupe Danone agreed to sell its global biscuit business for €5.3bn in cash last year.

The acquisition included 32 manufacturing facilities and approximately 14,000 employees.

With this acquisition, Kraft aimed to spur expansion in Europe and to obtain exposure to key markets like Russia and China while Paris-based Danone decided to focus on its Activia and Danacol yogurts and on emerging-market beverage sales.

The European Commission's clearance was conditional upon Kraft's divesting a limited number of trademarks following concerns raised about the market share of the combined businesses in Spain and Hungary.

The acquisition received clearance without conditions in other EU markets.

When the sale was announced, the Commission highlighted two particular concerns it had related to the deal, stemming from how it would affect the sale of chocolate and biscuits in the region.

Regarding chocolate, the Commission said that Danone only sold chocolate confectionery on a national basis while Kraft was present throughout the region with its chocolate brands and some other locally sold products.

In combining these operations, the Commission found that the transaction threatened to impede competition in the Hungarian chocolate market.

Kraft agreed to divest the Balaton brand in the country.

The Commision also found that the sale would " significantly" reduce competition in the Spanish market for sweet biscuits as both Kraft and Danone have a significant presence in the market.

Kraft therefore agreed to divest some of its Spanish biscuit brands, including Artiach.

Kraft said that the disposal of certain brands in Spain and Hungary will not affect the group's ongoing businesses in these countries.

In Spain, the company aims to continue to develop its portfolio of biscuit, chocolate, coffee, cheese, desserts and mayonnaise brands including LU, Oreo, Fontaneda, Milka, Saimaza, Philadelphia, El Caserio, Royal and Kraft.

In Hungary, the company will continue to focus on developing its range of biscuit and chocolate brands such as Gyori Edes, Pilota, Milka, Sport and others.

The sale agreements are subject to regulatory approvals prior to closing, which is expected later this year.