NESTLE GETS U.S. OK FOR PURINA TAKEOVER.

Byline: Staff and Wire Services

The government cleared the way for the creation of a global pet-food empire Tuesday, approving Swiss food giant Nestle S.A.'s $10.3 billion purchase of Ralston Purina and alarming critics concerned that consumers will pay more to feed Fido and Fluffy.

While the deal brings together such brands as Alpo, Purina and Friskies, the companies agreed to sell Ralston's Meow Mix and Alley Cat dry cat food brands, the Federal Trade Commission said. The agency's antitrust division has been considering the deal for 11 months.

The FTC's decision ``ensures even more competitiveness in the world's most important pet-care market,'' said Peter Brabeck-Letmathe, Nestle's chief executive.

Nestle holds 32 percent of the U.S. cat food market, while St. Louis- based Ralston has 26 percent. Nestle also adds Ralston's 28 percent share of the dog food market to the 10 percent it already has.

Nestle has agreed to sell Meow Mix and Alley Cat to the Boston-based investment firm J.W. Childs Equity Partners II LP, which owns the pet supply company Hartz Mountain, the FTC said. Nestle will have to give up international trademarks for the brands and help Childs take them on.

Childs also must get FTC permission before reselling the brands during the next five years.

Without this agreement, Nestle would control about 45 percent of the U.S. dry cat food market, said Joe Simons, director of the FTC's Bureau of Competition.

Last week, Senate Judiciary Chairman Patrick Leahy, D-Vt., suggested that the FTC extend its investigation of the merger. He cited concerns from consumer and farm groups that the deal would give Nestle an unfair advantage on store shelves.

Arthur Jaeger, associate director of the Consumer Federation of America, said the deal could hurt consumers.

``You're talking about one big player and we don't think that's going to serve the consumer's interest,'' Jaeger said. He said there could be ``price increases that you wouldn't otherwise see and less competition that leads to less innovation and fewer choices.''

But John McMillin, an analyst with Prudential Securities Inc., said the combined companies could be more efficient.

``I don't think consumers need to run out and buy their cat food right away because prices are going up,'' he said.

Although Nestle was already big in the canned pet food market, the deal makes them a major player in the fast-growing area of dry pet food, McMillin said. Buying Ralston means Nestle controls about one-third of the total U.S. pet food industry and a fifth of the world market, he said.

The FTC voted 4-0 to approve the deal, with Chairman Timothy Muris not voting. Muris once worked for a law firm that represented Nestle.

Nestle's current pet food business has annual sales of about $3.7 billion. Last year, Ralston sales were $2.25 billion in the United States and $450 million internationally.

In the deal announced in January, Nestle agreed to pay $33.50 in cash per Ralston share.

In July, the European Union Commission approved the deal after Nestle agreed to take steps to preserve competition in Spain, Italy and Greece.

Some procedural steps remain. The agreement is subject to a 30-day public comment period before the commission votes to make it final.

Nestle will retain a presence in St. Louis, merging its domestic Friskies pet food business with Ralston to form Nestle Purina Pet Care, the merged companies' North American operation.

Ralston markets dry pet food under a number of different names, including Purina, Pro Plan and Meow Mix, and also makes cat and dog litter. Nestle, the world's largest food company, produces everything from Baby Ruth candy bars to Perrier spring water.

In 1985, Nestle purchased Carnation, which owned Friskies, and in 1994 it bought the Alpo brand.