Blog: Dean BestNestle's Hsu Fu Chi deal signals greater tolerance from Beijing

Dean Best | 8 December 2011

Could Beijing's reluctance to allow foreign investors to snap up its biggest companies be easing? Some industry watchers certainly think so, following the Chinese government's decision to approve Nestle's bid to buy a majority stake in Hsu Fu Chi, one of the country's largest confectioners.

Nestle signed an agreement to buy 60% of Hsu Fu Chi back in July but it was not until this week that the Swiss food giant could sit back and toast the S$2.1bn deal.

A statement from Hsu Fu Chi yesterday (7 December) said that, a day earlier, China's Ministry of Commerce had cleared the deal.

The potential benefit for Nestle of investing in Hsu Fu Chi, China's third-largest confectioner, were covered on these pages when the agreement was first struck but, according to some analysts, Beijing's approval could have wider ramifications for overseas companies looking to expand in China.

In the past, there have been signs that China has frowned upon multinationals acquiring the country's largest companies. In 2009, Beijing prevented Coca-Cola Co. from buying juice maker Huiyuan, a decision some saw as the Chinese government being unwilling to allow its leading companies to fall into foreign hands. At the time, Beijing insisted it had blocked the deal on competition grounds.

Nevertheless, the Hsu Fu Chi deal, combined with Yum Brands' acquisition of Chinese restaurant operator Little Sheep Group last month, are being seen as a signal from Beijing that it is more open to these kind of transactions.

"China is now saying that it's open to multinational companies," Frank Schoneveld, a partner at law firm McDermott Will & Emery told the Wall Street Journal yesterday.

Another analyst told the publication that the decision was evidence that China was no longer using anti-competition rules to stymie overseas investment.

"China's regulators are now attempting to present a level playing field for foreign and domestic companies," Marc Waha, partner at law firm Norton Rose, told the WSJ.

Investing further in China could, then, have become a little less problematic.


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