China OKs Nestle Buy, Opens Door for Big Brand M&A
Following its landmark decision last month to let KFC operator Yum Brands (NYSE: YUM) purchase Little Sheep (HKEx: 968), China’s largest hot pot chain, Beijing has once again approved another foreign acquisition of a domestic big brand, this time allowing Nestle (Switzerland: NESN) to buy candy maker Hsu Fu Chi (Singapore: HSFU), a move that should encourage more such M&A. (English article) China’s controversial 2009 decision to veto the purchase of leading domestic juice maker Huiyuan (HKEx: 1886) by Coca Cola (NYSE: KO) sent a chill through the cross-border M&A market for major Chinese brands, as many interpreted the move — theoretically made on anti-monopolistic concerns — as a nationalistic reaction by Beijing technocrats reluctant to see a promising domestic name swallowed up by a foreign multinational. The veto created so much concern that it took more than 2 years for another company, Yum, to try a similar acquisition, again testing Beijing’s commitment to free trade and openness to letting its healthy companies get acquired by foreigners. This rapid succession of approval for the acquisition of Little Sheep followed by Hsu Fu Chi, Nestle’s biggest purchase in China to date, seems to indicate that China will take a more balanced approach to foreign M&A of its healthy brands in the future, which could provide a nice lift for stocks in other listed big brands like Huiyuan that enjoy a strong reputation in China. Of course, China will now expect reciprocal treatment in the West, such as for Shanghai-based food maker Bright Food’s pending acquisition of Australia’s Manassen, announced in August. (previous post) I don’t see any problems for this kind of cross-border M&A in popular consumer areas like food and restaurants, though the tech space may continue to be sensitive as evidenced by the derailment of Huawei’s planned purchase of a small US tech firm early this year. (previous post) All that said, this latest approval by China’s anti-monopoly regulator should breathe some healthy new life into cross border M&A in the consumer sector, bringing good news for both acquirers and acquisition targets both inside and outside China.
Bottom line: China’s approval of the sale of a leading candy maker to Nestle reaffirms its new commitment to allowing big consumer brands be purchased by Western firms, paving the way for more such acquisitions.
Related postings 相关文章:
◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢
◙ Bright Finally Finds Tasty M&A in Australia’s Manassen 光明食品终於觅得“佳偶”
◙ Huawei quits 3Leaf buy, but stay tuned for more
