(Bloomberg) – Nestle SA will buy back 10 billion francs ($9.6 billion) of stock after selling its stake in Alcon Inc., signaling the food company may have no imminent plans to buy a company the size of Cadbury Plc, analysts said.

The two-year buyback will begin once an existing 25 billion-franc program ends this year, Nestle said. The KitKat maker made the announcement earlier than anticipated since the current program still has months to go. Nestle may boost the buyback amount at a later date, Standard & Poor’s analyst Olaf Toelke said.

“Nestle appears not to be too hasty to make large acquisitions,” said Toelke, who rates the company’s long-term debt AA with a “stable” outlook. The most likely outcome is a “gradual erosion of cash” returned to shareholders and through smaller acquisitions, he added.

The $28.1 billion Nestle will get from selling its 52 percent Alcon stake to Novartis AG has led investors to speculate the company may bid for Cadbury, the target of a bid by Kraft Foods Inc., or buy out L’Oreal SA, said Claudia Lenz, an analyst at Bank Vontobel in Zurich.

Nestle hasn’t changed its budget for takeovers, spokeswoman Nina Backes said today by phone. Chief Executive Officer Paul Bulcke raised the amount to as much as 3 billion francs in October from as much as 2 billion francs previously. Backes declined to comment further on Nestle’s acquisition strategy.

10 Percent

The maximum amount that Nestle can repurchase in a single program is 10 percent of its stock, according to Swiss regulations, Nestle’s Backes said. That would equate to about 18.6 billion francs based on the company’s market value of 186 billion francs. Nestle will probably finish the 10 billion franc program early and then announce another one, wrote Andrew Wood, an analyst at Sanford C. Bernstein.

“Opportunities can always appear, but it seems there is nothing evident at the moment,” Wood wrote today.

ING’s Gulpers said Nestle could also spend 1 billion francs more a year on dividends, boosting its payout ratio to 60 percent of profit from 50 percent.

“They’re basically telling you that they aren’t planning a major acquisition, but it still leaves them with the flexibility if a strategic opportunity comes by,” said Marco Gulpers, who has a “hold” recommendation on Nestle shares as an analyst at ING Wholesale Banking.

‘Megabuck’

Chief Financial Officer Jim Singh said in August that Nestle will avoid “megabuck” deals and make “bolt-on” acquisitions in nutrition and water. Nestle will have multiplied the value of its investment in Alcon by more than 140 times over 33 years, according to Bloomberg calculations.

To be sure, some analysts say Nestle could plan a big purchase. Nestle has sufficient funds to make a joint bid with Hershey Co. for Cadbury to counter Kraft’s 10.5 billion-pound ($16.9 billion) offer for the U.K. maker of Crème Eggs, wrote Warren Ackerman, an analyst at Evolution Securities.

Hershey and Ferrero SpA have both said they are considering their options in official statements following press speculation they may bid for Cadbury. Nestle has made no comment.

The Swiss food company also owns a 29 percent stake in L’Oreal. Nestle has agreed with L’Oreal’s 87-year-old main shareholder, Liliane Bettencourt, that it won’t raise its stake until after she dies.

“We see Nestle in a strong position to do a big deal here,” wrote David Hayes, an analyst at Nomura in London. Investors may speculate Nestle is interested in Cadbury or Mead Johnson Nutrition Co., he said.

Novartis Option

Novartis today exercised an option to acquire Nestle’s stake in Alcon, the world’s largest eye-care company. The Swiss drugmaker, which bought 25 percent of Alcon from Nestle in July 2008, also made a share-exchange offer for those shares listed on the New York Stock Exchange.

Nestle rose 80 centimes, or 1.6 percent, to 51 Swiss francs at 3:26 p.m. in Zurich trading. Novartis fell 1.15 francs, or 2 percent, to 55.35 francs. Alcon dropped $4.85, or 3 percent, to $159.5 on the NYSE today.

Nestle expects the sale to conclude around the middle of this year, subject to regulatory approvals. Investor relations head Roddy Child-Villiers said in October that the company didn’t plan to decide on a new buyback until that time.

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To contact the reporter on this story: Tom Mulier in Geneva at tmulier@bloomberg.net.

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