China approves Nestlé’s $1.7bn bid for stake in confectioner

The Chinese Government has cleared Nestlé’s bid to acquire a majority stake in Singapore-listed confectionery manufacturer Hsu Fu Chi for $1.7bn, following the completion of an anti-monopoly review.

In July, Nestlé entered into a partnership agreement with Hsu Fu Chi to buy a 60% stake in the company, as part of its strategy to generate over 45% of its revenue from emerging markets by 2020.

Once completed, Hsu Fu Chi will hold the remaining stake, and its current CEO and chairman Hsu Chen will head the company in the new partnership.

Nestlé will buy 43.5% of Hsu Fu Chi shares from independent shareholders for S$4.35 (US$3.38) per share, a premium of 8.7% on the 1 July closing price.

Hsu Fu Chi spokeswoman said that the company expects the courts in the Cayman Islands, where the company is registered, would soon clear its delisting from Singapore Stock Exchange, and expects the transaction, Nestlé’s biggest in China, to close by the end of December.

The clearance for Nestlé’s latest bid comes a month after Beijing approved Yum Brand’s takeover of restaurant company Little Sheep, easing concerns over its hardline stance towards acquistion of local brands by foreign companies.

Hsu Fu Chi, which manufactures sugar confectionery, cereal-based snacks, packaged cakes and the traditional Chinese snack sachima, operates four large-scale factories in China and reported sales of CHF669m ($803m) in 2010.

Nestlé China manufactures culinary products, soluble coffee, bottled water and milk powder, and operates 23 factories and two R&D centres, with sales of CHF2.8bn ($3.3bn) in 2010.

Early this year, the Swiss company acquired a 60% stake in food-maker Yinlu Food, which produces ready-to-drink peanut milk and ready-to-eat canned rice porridge.

Caption: The clearance for Nestlé’s bid for a 60% stake in Hsu Fu Chi eases concerns over Beijing’s hardline stance towards foreign firms acquiring local brands.