Nestle in talks to buy Chinese sweetmaker

Chinese sweetmaker Hsu Fu Chi and Swiss food giant Nestle said on Monday that they were in acquisition talks, in what could be one of the biggest takeovers of a Chinese company by a foreign competitor. Hsu Fu Chi, listed on the Singapore stock exchange, requested that trading of its stocks be suspended from Monday "to avoid abnormal fluctuation over the company's shares price and maintain shareholders' interests." At the end of the trading day in Singapore, the Chinese firm, which has a market capitalisation of about $2.6 billion (1.8 billion euros), issued a statement to confirm negotiations with Nestle. "The company wishes to inform shareholders of the company that it has engaged in preliminary confidential discussions with Nestle S.A. in relation to a possible transaction relating to the company, which may or may not lead to an offer being made for the shares of the company," it said. Nestle later also issued a statement to say that "it is engaged in preliminary confidential discussions with Hsu Fu Chi" but would not divulge any details. The negotiations surrounding Nestle's purchase of Hsu Fu Chi have been described as delicate, and a deal is not expected before weeks, according to the Wall Street Journal, which quoted an anonymous source. Hsu Fu Chi's net profit for the quarter ending March 31 reached 206.6 million yuan (22.0 million euros, $32.0 million), with revenues at 1.5 billion yuan, according to its latest income statement. For the year ending June 30, 2010, profits were at 602.2 million yuan and revenues at 2.0 billion yuan. Bank Vontobel analysts said the takeover "would make sense," pointing out that Nestle had said that it wants to increase emerging markets to make up 45 percent of its sales by 2020. In April, the Swiss food giant announced that it had acquired 60 percent of Chinese firm Yinlu Foods Group, which makes ready-to-drink peanut milk and ready-to-eat canned porridge.