Business / Companies

Wahaha runs to buy British snack brand KP

By Xie Yu and Xu Junqian in Shanghai (China Daily) Updated: 2012-08-21 10:54

Hangzhou Wahaha Group Co, China's biggest beverage producer, is in pole position to buy UK-based United Biscuits' 520-million-pound ($818 million) snack business KP Snacks, according to a report in the British newspaper The Sunday Telegraph.

If successful, it will be the second major acquisition by a Chinese food and drink giant of an overseas brand.

Shanghai-based Bright Food Group, also Wahaha's biggest rival in China, in May purchased a controlling interest in Weetabix Ltd, a major maker of breakfast cereals in the United Kingdom, making it the Chinese industry's biggest overseas acquisition so far.

Wahaha was unavailable for comment on Monday.

"No doubt, Wahaha has its advantages. As it is a leader in the food and drink business in China, and has successful experience of retailing in China, the world's largest market," said Zhang Huiming, head of the Enterprise Research Institute at Fudan University in Shanghai.

The Chinese market, with its huge consumption potential, will strongly support Wahaha, he added. But he added that it is not the proper time to go into a deep analysis of Wahaha's advantages and disadvantages, as it is still in competition with other companies for the deal.

Wahaha Chairman Zong Qinghou, 66, listed as the richest man in China by the Hurun Report this year, said earlier that his company "has abundant cash", and is willing to participate in sectors including oil exploration and the dairy business in Australia.

The Sunday Telegraph said that KP Snacks, which owns household brands in the UK such as McCoy's, Hula Hoops, KP Nuts and Skips, is being put up for sale by its private-equity owners, Blackstone Group LP and PAI. The pair, being advised by Credit Suisse, have sent a four-page sales "teaser" to six potential buyers, including Wahaha.

The teaser was also sent to cereal maker Kellogg's, which recently paid $2.7 billion for crisp company Pringles; Kraft, where KP's new chief executive formerly worked; and a series of private-equity firms, including Permira.

The final information memorandum will be sent out on Sept 3, the newspaper said.

"The international expansion of Chinese companies and their brands is now one of the most influential trends across the global business environment, and the Chinese companies have revealed a huge surge in confidence, ambition and determination to conquer global markets," said Mike Bastin, a researcher at Nottingham University's School of Contemporary Chinese Studies.

In 2010, Bright Foods was reported to be in talks with United Biscuits over an acquisition deal worth 21.7 billion yuan ($3.41 billion). But the company later denied the reports.

Zong is reported to have invested 1 billion yuan to build a department store in Hangzhou, Zhejiang province.

This is the first time the self-made billionaire has ventured outside the food and beverage sector.

Zong has recently returned from a 10-day European tour, during which the Hangzhou native met a score of fashion suppliers from cities like Paris, Milan, and Madrid, and invited them to join his business empire, said Shan Qining, a spokesman for Zong and Wahaha.

WAOU Plaza, the name of the store, meaning an exclamation of surprise in Chinese, will be a shopping destination offering exclusive European merchandise and situated in the outskirts of Zhejiang.

"What will be sold at my place will be affordable, quality, value-for-money products from Europe, nothing like the 1,000-yuan-a-piece luxuries that Chinese customers are familiar with," said Zong, during interviews with local newspapers in Hangzhou.

Zong called his entry into the retail sector "the first step of the company's multi-element operation" and "an important strategic decision made after careful thinking".

Founded in 1987 from a small school-run business, Wahaha Group now has more than 30,000 employees and assets of 31.8 billion yuan. In 2011, it achieved annual sales of 67.9 billion yuan and a profit of 12.3 billion yuan, ranking it eighth among the nation's non-State-owned enterprises.

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