Nestlé, Vevey, Switzerland, has agreed to purchase Kraft's frozen pizza business in the United States and Canada, including the DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio brands, for $3.7 billion, the company announced today.

The deal will enhance a Nestlé U.S. and Canadian frozen food operation that already features such well know brands as Stouffer's, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets.

"Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio," said Brad Alford, chairman and CEO of Nestlé USA, which will operate the acquired pizza business for the parent company.

The purchase fromKraft Foods, Northfield, Ill., makes Nestlé a major player in the North American pizza segment where it was only a minor presence previously. The acquisition affords it  the opportunity to build on pizza know-how and operations developed in Europe, the company stated.

Generating about $37 billion in annual sales, the United States is the largest pizza market in the world, Nestlé noted. With estimated 2009 sales of $2.1 billion, Kraft Foods has enjoyed a leadership position in the frozen pizza category, with double-digit North American sales growth registered over the past four years. Kraft has developed a strong pizza brand portfolio, Nestlé acknowledged. Delissio is the leading frozen pizza brand in Canada, for example. Also, DiGiorno and California Pizza Kitchen have helped drive premium segment development in North America, Nestlé pointed out.

Although subject to U.S. and Canadian regulatory approval, Nestlé expects to complete the pizza acquisition in 2010.