Nestle has signed an agreement with the founding family of Hsu Fu Chi International to acquire a 60% in the Chinese food company for USD1.7 billion.
Both of the two companies are among the top five companies by market share in the Chinese candy market and the transaction may affect the structure of the Chinese candy market. Therefore, the transaction is subject to the approval of the Chinese regulatory departments.
Under the agreement between the two parties, Nestle will gain a 60% stake in Hsu Fu Chi via the transaction and the Hsu family will hold the remaining 40%. Nestle said that it plans to buy 43.5% shares of Hsu Fu Chi from its independent shareholders at the price of SGD4.35 per share. If the plan is approved, Nestle will then acquire 16.5% shares of Hsu Fu Chi from the 56.5% shares currently owned by the Hsu family. Nestle will pay a total of SGD2.1 billion, which is about USD1.7 billion, for the deal.
Nestle said Hsu Fu Chi's two largest independent shareholders, Arisaig Partners Holdings and the units of the Baring Asia Private Equity Fund, have agreed to vote for the transaction. Units of the Baring Asia Private Equity Fund hold 16.5% of the stock, while Arisaig Partners Holdings owns 9%.
After the transaction, Hsu Fu Chi's current chairman and chief executive officer Hsu Chen will continue to lead the company.
According to the latest financial results of Hsu Fu Chi, the company's operating revenue in 2010 was CNY4.31 billion, a year-on-year increase of 14%; and its net profit was CNY602.2 million, a year-on-year increase of 31%. As one of the world's largest food manufacturers, Nestle's total market value is about USD200 billion and its operating revenue in 2010 reached USD840.7 billion.