Nestle heads to China

6 July 2011 – Nestle, the world’s largest food maker, has now confirmed that it is in preliminary takeover discussions with Chinese snack and confectionery firm Hsu Fu Chi, a deal that would cost about $2.6bn, and would be one of the biggest foreign takeovers of a Chinese company.

This is a positive move for both companies involved, Nestle will gain access to China’s $6bn confectionery market and Hsu Fu Chi has been looking for a partner in the US, Japan and Europe for a number of years.

China’s food and drinks sector has been targeted by many global companies in recent years, as rising incomes prompt people to spend more on food. However government regulations on foreign ownership are making acquisition deals notoriously tough to complete. For example, in 2009, authorities rejected a $2.4bn deal by Coca Cola to buy juice maker China Huiyuan, citing antitrust concerns.

While the deal may look attractive for Nestle it is not going to be an easy process.

What do you think?

"Delighted to see that success in terms of both environmental responsibility and corporate profitability. My experience of supplying most of the Rowntree Mackintosh (latterly Nestlé) UK factories and, in particular, Fawdon and the Kit Kat 4 factory in York always led me to understand that both criteria were of high importance to the group."

Graham Watson, Owner, Alisyncro and editorial board member for Confectionery Production