Nestle expands in China deal

 
City A.M. Reporter
NESTLE, the world’s biggest food company, yesterday agreed to take a 60 per cent stake in China’s Yinlu Foods Group for an undisclosed price, becoming the latest multinational to target China’s fast-growing food and beverage sector.

Family-owned Yinlu had sales of about SwFr750m (£515m) in 2010, Nestle said in a statement yesterday. Nestle did not disclose financial details of the deal and said it was subject to regulatory approval in China.

Yinlu, from China’s southeastern Fujian province, is known for its peanut milk and instant porridge products.

Analysts said the deal is most likely to be approved because Yinlu operates in a niche segment of the market despite being a brand with a large regional presence.

In 2009, China’s regulators killed Coca Cola’s bid to buy well-known juice maker China Huiyuan Juice Group on monopoly concerns.

“There is a decent chance the deal will get approved because it is not a complete takeover. But there will still be some regulatory scrutiny because right now the government is wary of foreign companies making too much money here,” said Shaun Rein, managing director of China Market Research Group.

Nestle has been operating in China for more than 20 years and employs 14,000 people.

Analysts said the deal is beneficial to both Nestle and Yinlu. It provides Nestle a way into a different market segment, they said.