Swiss food giant Nestle is to take a majority stake in US ice-cream maker Dreyer's Grand Ice Cream.

Nestle said it has also agreed the terms of an option to buy the rest of California-based Dreyer in 2006 for about $2.5bn (�1.7bn).

If that deal goes ahead, Nestle said, it would put it on a par with Unilever, the world's biggest seller of ice-cream.

"This move underscores our commitment to growing and improving our ice cream business ... in the world's highest per capita consumption market, the USA", said Nestle chief executive Peter Brabeck.

Sweet diversity

Dreyer's brands include many ice-cream variants of popular chocolate snack bars.

Nestle has reshaped and expanded its ice-cream business in recent months by buying luxury brand Haagen Dazs and German ice cream firm Schoeller.

Nestle's other products include numerous chocolate bars as well as Nescafe coffee and Perrier water.

The California firm, founded in 1928, operates under both the Dreyer's and Edy brand names.

Nestle will merge its US ice-cream operations into Dreyer's, a manoeuvre it expects to yield about $170m in cost savings a year by 2005.

The initial deal involves no cash. Nestle will get new shares in Dreyer to raise its stake in the US ice-cream firm to 67% from 23%.

Dreyer chief executive Gary Rogers will captain the merged business from its current HQ in Oakland, California.

Dreyer's shares will continue to trade on New York's Nasdaq stock index.

Dreyer sales were worth $292m in the three months from January to March 2002 and it made net profits of $1.3m.