In July, Nestle, the world's largest food company, offered to pay $1.7 billion for the stake in Hsu Fu Chi as part of its plan to further tap the Chinese market.
Hsu Fu Chi, which makes sugar sweets, cereal-based snacks, cakes and the traditional Chinese snack sachima, is listed in Singapore and reported sales of 669 million Swiss francs ($722 million) in 2010. It employs 16,000 people.
The deal, Nestle's biggest in China, brings it closer to its target of 45 percent of sales from emerging markets in about 10 years.
After the failure in 2009 of Coca-Cola Co's $2.4 billion bid for Chinese juice producer China Huiyuan Juice Group Ltd, rejected by the government on competition concerns, lawyers and bankers have speculated that Beijing would seek to protect local brands from overseas buyers.
The approval of the Nestle-Hsu Fu Chi deal suggests that's not the case, said Frank Schoneveld, a partner at the McDermott, Will & Emery law firm in Shanghai.
"There had been a concern that if you were doing a transaction that involves a popular Chinese brand it would be difficult to get that through. This deal, together with the earlier Yum Brands-Little Sheep transaction, shows that's not the case," said Schoneveld.
China's Ministry of Commerce approved Yum Brands' takeover of Little Sheep Group Ltd in November.
Delisting from Singapore
A spokeswoman for Hsu Fu Chi told Reuters that the company was not awaiting approval from other Chinese regulators, and expected that courts in the Cayman Islands, where the company is registered, would soon approve its delisting from the Singapore Stock Exchange.
The transaction should close by the end of December, she added.
Under their agreement, Nestle will buy 43.5 percent of Hsu Fu Chi's shares from independent shareholders at S$4.35 a share, a premium of 8.7 percent over the July 1 closing price. Trading of the Dongguan-based company's shares was halted on July 1 when the companies said they were in talks. (Reuters)
