Nestle in partnership talks with Hsu Fu Chi
Source: Bloomberg News |
July 5, 2011, Tuesday
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Print Edition
Print Edition
NESTLE SA, the world's largest food maker, yesterday said it's in preliminary discussions with Hsu Fu Chi International Ltd after being identified as a potential suitor for China's biggest confectioner by market value.
Nestle has "no further comments to make at this stage," said Nina Caren Backes, a spokeswoman for the Vevey, Switzerland-based company.
Hsu Fu Chi also said yesterday that Nestle is assessing a bid and that the two companies have been in talks on a partnership for a few years. Talks are also being held with other potential suitors, said Christine Sun, a spokeswoman for the Dongguan, Guangdong-based company.
Hsu Fu Chi is valued at S$3.2 billion (US$2.6 billion) on the Singapore exchange, where its shares were suspended before trading started yesterday. Nestle had more than 16 billion Swiss francs (US$18.8 billion) of cash at the end of 2010 and has said it will consider "bolt-on" acquisitions.
"Strategically, we would view the deal positively since it would give Nestle access to China's fast-growth US$6 billion confectionery market and allow the group a number of international cross-selling opportunities," MF Global analysts, including Andy Smith, wrote in a research note.
Nestle amassed a cash pile after receiving US$28.3 billion in August for a majority stake in the Alcon eye-care division. Still, the food company has mostly shied away from major acquisitions, its biggest recent purchase being Kraft Foods Inc's North American pizza business for US$3.7 billion.
Buying Hsu Fu Chi would give Nestle access to nationwide distribution in China's confectionary market, according to researcher Euromonitor International. Hsu Fu Chi, which generates all its revenue in China, may need Nestle to expand overseas, said Ben Cavender, an analyst at China Market Research in Shanghai.
An acquisition of Hsu Fu Chi at its current market value would be the largest on record of a Chinese firm by a company based outside the country, according to Bloomberg News data.
An overseas offer may encounter regulatory scrutiny from the Chinese government, which blocked Coca-Cola Co's bid for China Huiyuan Juice Group Ltd in 2009 because of concern the tie-up would have hurt competition.
Nestle has "no further comments to make at this stage," said Nina Caren Backes, a spokeswoman for the Vevey, Switzerland-based company.
Hsu Fu Chi also said yesterday that Nestle is assessing a bid and that the two companies have been in talks on a partnership for a few years. Talks are also being held with other potential suitors, said Christine Sun, a spokeswoman for the Dongguan, Guangdong-based company.
Hsu Fu Chi is valued at S$3.2 billion (US$2.6 billion) on the Singapore exchange, where its shares were suspended before trading started yesterday. Nestle had more than 16 billion Swiss francs (US$18.8 billion) of cash at the end of 2010 and has said it will consider "bolt-on" acquisitions.
"Strategically, we would view the deal positively since it would give Nestle access to China's fast-growth US$6 billion confectionery market and allow the group a number of international cross-selling opportunities," MF Global analysts, including Andy Smith, wrote in a research note.
Nestle amassed a cash pile after receiving US$28.3 billion in August for a majority stake in the Alcon eye-care division. Still, the food company has mostly shied away from major acquisitions, its biggest recent purchase being Kraft Foods Inc's North American pizza business for US$3.7 billion.
Buying Hsu Fu Chi would give Nestle access to nationwide distribution in China's confectionary market, according to researcher Euromonitor International. Hsu Fu Chi, which generates all its revenue in China, may need Nestle to expand overseas, said Ben Cavender, an analyst at China Market Research in Shanghai.
An acquisition of Hsu Fu Chi at its current market value would be the largest on record of a Chinese firm by a company based outside the country, according to Bloomberg News data.
An overseas offer may encounter regulatory scrutiny from the Chinese government, which blocked Coca-Cola Co's bid for China Huiyuan Juice Group Ltd in 2009 because of concern the tie-up would have hurt competition.
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