Nestle is expected to announce a $5 billion deal to acquire the Gerber baby-food unit from Novartis, expanding its scope in the nutritional products business.

Nestle is expected to announce a $5 billion deal to acquire the Gerber baby-food unit from Novartis, expanding its scope in the nutritional products business.

Nestle is betting that it can add scientific advances in nutrition to foods and beverages, and that shoppers will pay more for new features. While the market for baby food has been relatively slow growing, profit margins are among the highest in the prepared-food industry, at 24% in the U.S. , vs. 16% for all packaged food, according to Morgan Stanley. The business also tends to have strong customer loyalty and limited competition from private labels.

Nestle had been wanting to buy Gerber, the biggest baby-food brand in the U.S. , for more than a decade. Novartis, based in Basel , Switzerland, has shed several of its businesses in recent years, including its medical-nutrition division to Nestle for $2.5 billion in December, to focus on inventing new prescription medicines, vaccines, and selling low-cost generic drugs and over-the-counter medicines.

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