Nestlé yesterday agreed to pay $2.5 billion (£1.27 billion) to buy the medical nutrition arm of Novartis, the pharmaceutical giant, in a deal intended to cement its position as a manufacturer of specialised health foods.

Novartis Medical Nutrition makes a range of nutrition products, specialised foods and supplements that are fed to elderly or sick patients via the mouth or a feeding tube, rather than the bloodstream.

Its key brands include Isosource, Novasource, Resource, Impact and Compat. They are often administered in hospitals to people for whom illness or disabilities restricts their ability to eat a regular diet.

Novartis Medical Nutrition, which generated operating profits of about $90 million last year on turnover of $950 million, is based in Gland, Switzerland, and operates in some 40 countries. It employs 2,000 people, includes manufacturing and research plants in Minneapolis and Osthofen, Germany, and had operating profits of about $90 million last year on turnover of $950 million.

The acquisition will raise Nestlé’s share in the $6 billion global oral medical nutrition market from 7 to 25 per cent, putting it just behind Abbott Laboratories, the US market leader, which has 30 per cent.

Numico of Holland is in third place with 16 per cent, while Fresenius of Germany has about 8 per cent.

Gerard Rijk, food and beverages analyst at ING in Amsterdam, said that the oral medical nutrition market is expanding rapidly. The world’s population is ageing and such products are easier and cheaper to administer than nutrition products delivered via the bloodstream.

While the market for such products is predominantly in the industrialised world, there is a growing demand from developing countries, where populations are growing and standards of healthcare are improving.

“For Nestlé this is a good deal because it gives them critical mass,” Mr Rijk said. “Previously Nestlé was sub-scale in medical nutrition in areas such as the USA. This will give them scale and greater opportunity to grow.” The deal reflects a broader strategy by Nestlé to expand its presence in specialist nutrition markets, including baby food.

Peter Brabeck-Letmathe, Nestlé’s chairman and chief executive officer, said: “This is a very important step for the Nestlé Group in its strategic transformation process to a nutrition, health and wellness company, as it strengthens the core of our globally managed nutrition business.”

Novartis inherited its medical nutrition business from Sandoz in 1996 when the company was renamed after a merger with Ciba-Geigy. The company has made no secret of its desire to sell non-core businesses to focus on pharmaceuticals and generic drugs.

The Nestlé-Novartis deal did not include Gerber, Novartis’s US-based baby-foods business, in which Nestlé is also thought to be interested. Nestlé and Novartis declined to comment.