July 16, 2024

DealBook: Nestle to Buy Control of China’s Biggest Confectioner

Candy from Hsu Fu Chi International, a Chinese confectioner, and Nestlé, teh Swiss food giant.Adrian Bradshaw/European Pressphoto AgencyCandy from Hsu Fu Chi International, a Chinese confectioner, and Nestlé, teh Swiss food giant.

Nestlé said on Monday that it had agreed to pay $1.7 billion for a 60 percent stake in a big Chinese confectioner, in one of the biggest deals ever by a foreign company in China.

Best known for its soluble coffee brands, bottled drinks and baby foods, the Swiss food giant is teaming up with Hsu Fu Chi International, a maker of chocolate, candies and pastries popular in China, to create a joint venture that Nestlé said would “greatly reinforce” its presence in China.

Under the terms of the deal, Nestlé will pay 4.35 Singaporean dollars a share for a 43.5 percent stake in Hsu Fu Chi, which is based in the southern Chinese city of Dongguan but is listed on the Singapore stock exchange.

The remaining 56.5 percent will be held by the founding Hsu family, which intends to sell some of that stake to Nestlé and ultimately retain 40 percent. Hsu Fu Chi’s current chief executive, Hsu Chen, will head the joint venture.

The offer price is 8.7 percent above Hsu Fu Chi’s closing price on July 1, the final trading day before the company disclosed that it was in talks with potential partners.

For the deal to proceed, a majority of Hsu Fu Chi’s independent shareholders — representing at least 75 percent of independently held shares — have to accept the offer, though Nestlé said it had already secured the agreement of the largest independent shareholders.

If approved by shareholders and Chinese regulators, the deal will cost Nestlé about 2.1 billion Singapore dollars, or about $1.7 billion.

With 2010 sales worth 669 million Swiss francs, or $800 million, Hsu Fu Chi is a leading manufacturer and distributor of confectionery products in China, Nestlé said in a statement, adding that Hsu Fu Chi’s large portfolio of affordable products fit “perfectly into Nestlé’s global portfolio.”

The Swiss company has been present in China for more than 20 years and now operates 23 factories and two research centers in the country. Its sales in China totaled 2.8 billion Swiss francs last year.

The proposed partnership with Hsu Fu Chi “demonstrates our long-term commitment to China and enhances our ability to grow our portfolio of international and local brands in this dynamic market,” Paul Bulcke, the chief executive of Nestlé, said in the statement.

The deal highlights the keen desire of many Western retailers and consumer goods companies to expand in China, whose 1.3 billion consumers are growing ever more able and willing to spend money on goods.

An attempt by Coca-Cola to acquire the Chinese juice maker Huiyuan was blocked by regulators two years ago, but that has not stopped foreign companies from seeking partnerships with local players.

In May, Yum Brands, the company behind Kentucky Fried Chicken and Pizza Hut, announced plans to raise its stake to more than 90 percent in Little Sheep, which operates hundreds of hot pot restaurants throughout China.

In April, Nestlé signed a partnership with the Yinlu Foods Group, which makes ready-to-drink peanut milk and ready-to-eat canned rice porridge, also taking a 60 percent stake in the new venture and keeping the Yinlu chairman, Chen Qingyuan, to lead the business.

The price of that transaction was not disclosed, but Yinlu and Hsu Fu Chi are comparable in terms of annual sales.

Michael J. de la Merced contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=e54176737292a6c9b80443d2bf46c8c3

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