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March 12, 2020

Nestle ‘hires JPMorgan to oversee potential sale of Yinlu’

Nestlé has reportedly appointed a US investment bank to oversee the sale of its troublesome Chinese business unit. 

By Dean Best

Nestlé has reportedly appointed JPMorgan Chase & Co. to oversee the sale of its troublesome Chinese business unit Yinlu and has reached out to potential suitors.

Quoting sources with knowledge of the proceedings, Bloomberg said Nestlé has approached Chinese food and beverage companies like Dali Foods Group Co., Hangzhou Wahaha Group Co. and Uni-President China Holdings Ltd. as possible buyers. The news agency repeated previous murmurings that a sale could fetch in the region of US$1bn.

Nestlé plans to offload a majority stake in Yinlu and may retain a “small holding” to oversee the production of Nescafe ready-to-drink coffee, which Yinlu co-manufactures in China, one of the people told Bloomberg, with the sources declining to be named because the information is private.

The world’s largest food company intends to call for first-round bids by late April or early May, although the coronavirus outbreak could delay the process, according to the people.

“We do not comment on market rumours,” a Nestlé spokesperson said when contacted by just-food for comment. Bloomberg said it had not had a response either from the companies approached.

Nestlé acquired food and beverages firm Yinlu in 2011, along with China-based confectionery unit Hsu Fu Chi, which has also been speculated as being a candidate for disposal.

When reporting its annual results in February, chief executive Mark Schneider said: “We have a number of specific issues to address…one is for example in China. We have been slowed down by Yinlu, where we felt in 2018 we would stabilise the situation but we saw in 2019 that that was not the case. So we are working on the strategy and will be back to you later this year on how to address that.” 

The KitKat maker has been undergoing a rejig since Schneider came on board three years ago, selling off a host of ill-fitting, low-margin assets, and investing in on-trend, high-growth areas such as plant-based foods, where he’s made two recent acquisitions – Sweet Earth and Terrafertil. 

He has sold Nestlé’s skin health and life-insurance businesses, and more recently, its US ice cream operations and a big stake in Herta meats.

See just-food’s analysis of Yinlu and Hsu Fu Chi: Nestle may soon show how rules of game have changed in China

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