Nestlé to enter partnership with Chinese confectionery company Hsu Fu Chi

Nestlé has announced that it has entered into a partnership agreement with the founding family of Singapore-listed Hsu Fu Chi, a leading manufacturer and distributor of confectionery products in China. Under the proposed agreement, Nestlé intends to acquire 60% of Hsu Fu Chi whilst the Hsu family will own the remaining 40%. Hsu Fu Chi’s current CEO and Chairman, Hsu Chen, will continue to lead the company in the new partnership.

Nestlé proposes to acquire the shares of Hsu Fu Chi’s independent shareholders, and has  secured irrevocable undertakings from the two largest independent shareholders to vote in favour. The total price to be paid by Nestlé is approximately SGD 2.1 billion (CHF 1.4 billion). The completion of the transaction is subject t regulatory approval in China.

Hsu Fu Chi’s portfolio includes sugar confectionery, cereal-based snacks, packages cakes and the traditional Chinese snack, sachima. Hsu Fu Chi’s products complement Nestlé’s existing product portfolio in China,, which includes culinary products, soluble coffee, bottled water, milk powder and products for the food service industry.

In 2010, Hsu Fu Chi reported sales  of CHF 669 million and an EBIT margin of 17.3%. The company operates four large-scale factories in China, has excellent distribution capabilities and employs 16,000 people. Market analysts estimate that Hsu Fu Chi is the second-largest confectionery company in China with a market share of 4.2% (market leader Mars has a share of 15.5%)

Nestlé has been present in China  for over 20 years and today operates 23 factories, two R&D centres and employs 14,000 people. Its China region achieved sales of CHF 2.8 billion in 2010. Main Nestlé brands in China include Nescafé, Nan and Maggi as well as local brands such as Totole, Haoji and Dashan.

In April 2011, Nestlé announced that it had signed a partnership agreement taking a 60% stake in the Chinese food company Yinlu Foods Group, without revealing details of the transaction. Family-owned Yinlu is a well established household brand in China and a significant marketer for ready-to-drink peanut milk and ready-to-eat canned rice porridge. Yinlu is a co-manufacturer for ready-to-drink Nescafé coffee in China. Yinlu’s Chairman, Chen Qingyuan, will continue to lead the company in the new partnership.

Source: Nestlé press releases