Nestle to weigh $1b sale of two ailing Chinese units

A Nestle SA birds nest logo is displayed on a glass surface ahead of a news conference announcing the company's full year results in Vevey, Switzerland, on Thursday, Feb. 14, 2019. Photographer: Stefan Wermuth/Bloomberg

Nestle SA is weighing options including a sale for two ailing Chinese units after years of attempting to turn them around, people familiar with the matter said.

The food giant has been reviewing its ownership of Hsu Fu Chi, a local confectionery brand, and Yinlu, known for its ready-made Chinese porridge, according to the people. It is seeking more than $1 billion for its controlling stakes in the two companies, the people said, asking not to be identified because the information is private.

Nestle acquired both companies in 2011 as it sought to tap burgeoning demand in China, only to find itself confronted with sluggish growth a few years later. Since becoming chief executive officer in 2017, Mark Schneider has been weeding out the Swiss company’s portfolio, jettisoning assets such as U.S. chocolate brands, a dermatology business and a life insurance unit for about $15 billion total.

Nestle, which makes Nespresso coffee and Gerber baby food, has made almost two dozen divestments under Schneider. It could opt to sell only part of its stakes in one or both of the Chinese units, according to one of the people.

Peanut Milk, Chocolate

No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction, the people said. A spokesman for Nestle declined to comment. Mergermarket reported earlier that Nestle was conducting a strategic review of the Yinlu business, citing unidentified people.

Shares of Nestle rose as much as 0.4% in Switzerland on Tuesday.

Yinlu has sales of about 1 billion Swiss francs ($1 billion), Nestle said earlier this month. About two-thirds of the business is made up of local products like peanut milk and a porridge called congee, whose sales have been “disappointing,” the CEO said at the time. The rest is ready-to-drink coffee, which has been going better.

“We’re working very, very hard to address that situation,” Schneider said on a call with analysts on Oct. 17. He has repeatedly said Nestle will sell businesses that are non-strategic if it’s not possible to fix them.

Hsu Fu Chi, which makes confectionery products and snacks, probably generates annual revenue of some 700 million francs, according to Vontobel analyst Jean-Philippe Bertschy. Nestle has tried to improve the packaging of Hsu Fu Chi chocolates and added nutritious snacks to appeal to more health-conscious millennial consumers.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.