NESTLÉ, the world’s largest food company, is paying a hefty $1.7bn (£1.1bn) for a 60 per cent stake in candymaker Hsu Fu Chi International to move deeper into fast-growing markets in China.
Nestlé’s biggest deal in China so far will take it closer to its target of 45 per cent of sales from emerging markets in about 10 years
International companies have been rushing to expand in Asian markets, where buoyant economic growth has boosted consumers’ purchasing power.
Yesterday alone, Asia-related deals worth some $15bn were announced, such as Dutch group Philips’ buy of Chinese appliance firm Povos.
Nestlé paid about 3.3 times sales for the stake, more than the 2.4 times US food group Kraft Foods paid for British candy group Cadbury.
The Nestlé deal was relatively expensive when compared with top deals in the food sector. Only Mars had to put more on the table for Wrigley at 4.2 times sales in 2008 and Danone for Numico at 4.5 times in 2007.
The deal will allow Nestlé to increase its footprint in emerging markets and get closer to catching up with rivals Danone and Unilever.
City A.M. Reporter