ZURICH - Food giant Nestle announced on Tuesday that it was buying Kraft Foods' frozen pizza units in the United States and Canada for 3.7 billion dollars (S$5.2 billion).

Kraft said it would use the entire proceeds to improve its bid for British confectionary group Cadbury as Nestle said it was not interested in buying up the chocolate bar maker.

The statement from Nestle was seen as killing rumours that the group, which is cash rich, might use its treasure chest to snap up Cadbury.

Kraft said its offer for Cadbury would now be about 11 billion euros (S$22.1 billion).

Nestle chief Paul Bulke said of the move on Kraft pizzas: "This frozen pizza business greatly enhances Nestle's frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery."

He said: "With total sales of around 3 billion (Swiss francs), Nestle will become the world leader in the attractive, fast-growing frozen pizza category."

A Nestle statement said the US is the largest pizza market in the world with consumer sales of about 37 billion dollars.

It said with estimated sales of 2.1 billion dollars in 2009, Kraft Foods was the leader in the frozen pizza category and had enjoyed double-digit growth in the US and Canada over the last four years.

The brands include DiGiorno, Tombstone and California Pizza Kitchen.

"Selling this business now not only delivers an attractive return for our shareholders, but enables us to better focus our resources on priority global brands and categories," said Kraft chief executive officer Irene Rosenfeld.

"Nestle is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods," Rosenfeld said.