Two family run companies are hoping to gain increased market share in a deal that characterises the rapidly consolidating confectionary industry.

Italian sweets maker Perfetti has revealed that it is buying out the two-thirds of the century old Van Melle it does not already own; valuing the Dutch interest at US$917m and creating an attractive acquisition target for the industry's big boys, Cadbury Schweppes and Nestlé.

The two European companies have cooperated for many years, sharing distribution and production systems since 1980. Perfetti has owned 37% of the Dutch company since 1991 and the full takeover agreement was finalised yesterday (15 January) bringing together popular brands such as the Dutch Fruitella and Mentos mints and Italian Brooklyn "the bridge" chewing gum and sweets Vigorsol and Vivident.

Bert van Dijk, vice president for human resources at Van Melle, commented: "We have looked forward in an increasingly concentrated market. If you want to fulfil your wishes, you need to be bigger."

The combined portfolio of sweets and chewing gum brands, to be called Perfetti Van Melle, will create the world's sixth largest sugar confections maker, with a number two position in Europe and number one spots in India, China and Indonesia. In a joint statement the companies revealed that it would "preserve the principles and values of both companies with respect to business strategy, employees, customers, consumers and the environment."

Competitors to the newly formed confectionery group - to be named Perfetti Van Melle in Europe, include Haribo, Cadbury Schweppes, Mars, Nestlé, Adams and Wrigley.

The move reflects the trend of consolidation that has swept through the global confectionery industry in the last year as increasing competition both at the retail and manufacturing level have seen companies combining efforts to reduce costs.

The Italian-Dutch group could also provide an attractive acquisition target for Cadbury Schweppes, Nestlé and even Kraft following Perfetti's recommended public offer.

Analysts have pointed out that a takeover will be easier because a larger company would only have to enter negotiations with a single board of directors. Furthermore, an analyst at a US bank in London revealed: "Cadbury is probably keen to augment its confectionary side, after spending so much time on its Snapple and drink-related acquisitions. Walking into the Dutch and Italian markets after its French buy could make a lot of sense, synergy-wise."

Neither Cadbury nor Kraft was available for comment, but a Nestlé spokesman said sugar confections is one of the key growth areas in the sector, both in Europe and around the world, and that the group "follows such deals with interest."

Van Melle rejected the suggestion that the deal was appropriately timed to coincide with the standing down of chairman Izaak van Melle after 25 years. It does seem particularly timely however, following several years of discussions about joining the interests but continued questions over who would manage the combined company. 

Now the new company will have executive offices in both Italy and the Netherlands, and be chaired by Augusto Perfetti, currently the chairman of the privately owned Italian company, which aims to finance the deal through internal funds and committed lines of credit. Perfetti commented: "The integration will benefit from significant product and geographic complementaries, providing a basis for further growth and expansion."