Nestle's bid for Chinese snack and candy maker may win approval
The proposed takeover of Chinese snack and candy maker Hsu Fu Chi International Ltd by Nestle SA, reported by the Wall Street Journal, is very likely to be approved by Chinese regulators, China Daily reported, citing analysts.
The Wall Street Journal reported on Sunday that Nestle, the world's largest food company by sales, is negotiating to buy Guangdong province-based Hsu Fu Chi, which has a market capitalization of $2.6 billion. A deal would be one of the biggest foreign takeovers of a Chinese company.
But any agreement is weeks away, as talks are at a delicate stage and there are several hurdles to overcome, the newspaper quoted an anonymous source as saying. Officials from Nestle and Hsu Fu Chi couldn't be reached by China Daily for comment on Monday. According to the newspaper, Hsu Fu Chi, which sells candies, cakes and pastries, is listed in Singapore. The 19-year-old company reported a 31-percent rise in 2010 profit to 602.2 million yuan ($93 million), with sales up 14 percent to 4.31 billion yuan. According to Euromonitor International, a London-based market research firm, Hsu Fu Chi had a 3.9-percent share of China's 58-billion-yuan confectionery market in 2008, when Nestle had a share of 1.6 percent. Acquiring Hsu Fu Chi would help Nestle achieve its goal of generating 45 percent of revenue from developing economies, including China, by 2020, compared with about a third at present. Guodu Securities analyst Xu Hao told China Daily that China's food and beverage market will experience a "golden era" of growth over the next five years. "The 12th Five-Year Plan has given new impetus to the country's policy of boosting domestic demand, which will benefit the food and beverage industry," Xu said. "We will see rapid growth and consolidation in the sector."