VEVEY, Switzerland - Cash-rich Nestle SA, the world's biggest food group, said it was speeding up a programme to buy back shares and was likely to raise fresh funds from the sale of its stake in eye care firm Alcon.
The firm declined to comment on any possible counterbid for Britain's Cadbury, though it said it was always open to purchases of the right kind and would return an extra 3 billion Swiss francs ($3 billion) to shareholders this year.
Nestle said it would probably now complete its 25 billion franc share buyback programme late in the first half of next year by which time, analysts speculated, it might launch another if it sells its Alcon stake.
We will update about Alcon as and when what is clearly a strong likelihood becomes a certainty, head of investor relations Roddy Child-Villiers told an analyst call after the firm reported in-line nine-months sales growth.
Nestle sold 25 percent of Alcon to Swiss drugmaker Novartis last year for $11 billion and agreed an option to sell its 52 percent from January next year. Novartis did not comment on Thursday on the possibility of exercising its Alcon option.
Even if the option is exercised very early, ... in other words in January sometime, it is still going to take a number of months before that deal closes and we get the cash in from Novartis, Child-Villiers said.
The fact that Alcon's share price has recently risen so that Nestle's put option is almost equivalent to that of Novartis' call has increased the likelihood of a sale, analysts say.
Shares in Nestle, which have rallied in recent days on hopes it will exercise the Alcon option soon, were up 1.7 percent to 46.66 Swiss francs at 0939 GMT versus a 0.3 percent weaker DJ Stoxx European food and beverage index .SX3P.
Selling the Alcon stake could yield enough cash to top Kraft Food Inc's proposed 10.2 billion pound ($16.87 billion) bid for Cadbury, but many analysts think Nestle is more likely to return the money to shareholders.
The buyback message could help and probably trigger speculation the company will use a fair chunk of Alcon proceeds (which we see happening in Q1) on another buyback, Kepler analyst Jon Cox said in a client note.
Chief Financial Officer Jim Singh told a news conference the accelerated buyback would mean Nestle has returned 40 billion francs in buybacks and dividends in the last four years, or about 25 percent of its total equity value.
Nestle Chief Executive Paul Bulcke declined to comment on specific buys, but said: It is clear that we are always looking for strategically fitting and economically viable acquisitions.
Analysts have speculated that Nestle might bid against Kraft for Cadbury.
But due to competition issues the Swiss company might look instead at a joint offer with U.S. chocolate maker Hershey Co (HSY.N), with the U.S. group seeking Cadbury's chocolate interests and leaving Nestle with the Trident chewing gum business.
Reporting nine-month figures, Nestle said organic sales growth was 3.6 percent, in line with the market consensus, while volume growth doubled from the first half to 1 percent.
Total sales fell 2.2 percent to 79.5 billion francs, missing an average analyst forecast of 80.3 billion francs as the strong Swiss franc had a 5.2 percent hit.
Nestle said its best known brands, including Nescafe coffee, Nestea, Nesquik and Nespresso, powered sales in the third quarter and would continue to propel the company's expansion in both emerging and developed markets.
More basic products including long-life milk in Brazil also sold well.
Nestle repeated its full-year outlook for volume-driven organic sales acceleration after it dropped its previous target of at least approaching 5 percent in August after disappointing first-half organic sales growth of 3.5 percent.
Before the figures, analysts were predicting full-year organic growth of 3.9 percent, rising to 4.5 percent in 2010.
Nestle's struggling bottled water business saw some improvement, particularly in Europe after a marketing drive, with organic growth down 1.8 percent to 7.2 billion francs, compared with a fall of 2.9 percent in the first half.
The booming Nespresso premium coffee capsule brand saw 28 percent organic growth and CFO Singh said annual sales of 3 billion francs were in sight.
(Additional reporting by Laura MacInnis, Rupert Pretterklieber; Editing by John Stonestreet) ($1=1.011 Swiss Franc)