Make me your Homepage
left corner left corner
China Daily Website

Hershey hits sweet spot with deal for Golden Monkey

Updated: 2013-12-20 07:37
By Shi Jing in Shanghai ( China Daily)

The Hershey Co, North America's largest quality chocolate producer, has announced plans to acquire 80 percent of snack producer Shanghai Golden Monkey Food Joint Stock Co Ltd.

The acquisition will be carried out through Hershey Netherlands BV, a wholly owned subsidiary. It's expected to be completed in the second quarter of next year, subject to approval from Chinese regulators and shareholders.

Terms of the transaction weren't disclosed, but Hershey said it will make a cash payment for the stake. SGM will operate as a stand-alone business, and its senior management team members will retain their roles.

Hershey hits sweet spot with deal for Golden Monkey

Workers pack candy at a subsidiary of Shanghai Golden Monkey Food Joint Stock Co Ltd in Henan province. The Hershey Co plans to acquire 80 percent of SGM, with the transaction expected to wrap up in the second quarter of 2014. Provided to China Daily

"SGM is the type of business we've been focusing on for potential M&A. It fits Hershey's acquisition criteria: It is located in our primary international market, China; it is a pure play confectionery and snacks company; and it has distribution into channels where Hershey products have yet to penetrate," said Humberto Alfonso, president of international operations at Hershey.

"Additionally, the company has a strong history of innovation and product quality as evidenced by the outstanding reputation of its core brand, Golden Monkey, which has been nationally recognized as one of China's most iconic brands," he said.

Rumors of the acquisition began to circulate about one year ago.

The acquisition is not expected to affect Hershey's previously announced adjusted earnings per share-diluted outlooks for 2013 and 2014, which were released on Oct 24. Excluding integration and transition costs, Hershey expects the acquisition to be slightly accretive on an adjusted basis in 2014.

"Hershey and SGM have similar cultures and strategies related to the building and selling of brands, and we're pleased that a company of Hershey's stature sees the potential in our great company.

"We look forward to working with Hershey and leveraging the resources that both of us have to offer to the great benefit of Chinese consumers, who will have even more choices for high-quality products after this transaction," said Zhao Qisan, founder, chairman and general manager of SGM.

Industry insiders said that the acquisition will help SGM integrate its businesses, explore more distribution channels and improve marketing.

Hershey's sales totaled about $7 billion in 2012. The privately owned SGM has seen double-digit growth in its net sales this year, which may reach $225 million.

Statistics from market research firm Euromonitor International show that Hershey has been selling mainly chocolate products in the Chinese mainland, with just a 2.2 percent market share in 2012. Competitor Mars Inc held a 43 percent market share.

SGM, whose products are mainly offered in second- and third-tier Chinese cities, abandoned a plan to go public in 2008.