Nestle Picks JPMorgan to Handle China’s Yinlu Sale
Nestle Picks JPMorgan to Handle China’s Yinlu Sale
(Bloomberg) -- Nestle SA has chosen JPMorgan Chase & Co. to handle the sale of its Chinese unit Yinlu Foods Group, in a deal that could value the business at about $1 billion, people with knowledge of the matter said.
The world’s largest food company is working with JPMorgan to prepare for the potential divestment, said the people, who asked not to be identified as the information is private. Nestle is reaching out to potential buyers including Chinese food and beverage companies like Dali Foods Group Co., Hangzhou Wahaha Group Co. and Uni-President China Holdings Ltd., the people said.
Nestle 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 said. The company currently plans to call for first-round bids as soon as late April or early May, yet the coronavirus outbreak could delay the process, according to the people.
Yinlu is famous for its ready-made Chinese porridge, and was acquired by Nestle in 2011. The Swiss company sought to tap the 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 Nestle’s portfolio, divesting assets such as a dermatology business and its U.S. ice-cream business.
Nestle’s restructuring costs and other expenses tripled to 2.6 billion francs ($2.8 billion) last year, largely led by a write-down of Yinlu’s value. Chief Financial Officer Francois-Xavier Roger said last month that not everything with Yinlu is negative as the Chinese company contributes to Nestle’s leading position in ready-to-drink coffee in China.
Deliberations are at an early stage and details of the sale may change, said the people. Representatives for Nestle and JPMorgan declined to comment, while representatives for Dali Foods, Wahaha and Uni-President China didn’t respond to requests for comment.
Yinlu, which started its food business in 1985, specializes in the production and sale of canned foods and beverages. The company has five production facilities in Xiamen, Shandong, Hubei, Anhui and Sichuan with an annual capacity of up to 6 million tons, according to its website.
Shares of Nestle fell as much as 6.4% in Zurich on Thursday as global stocks plunged into bear market on heightened concerns over the spread of the coronavirus.
--With assistance from Corinne Gretler and Daniela Wei.
To contact the reporters on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net;Dong Cao in Beijing at dcao59@bloomberg.net
To contact the editors responsible for this story: Fion Li at fli59@bloomberg.net, David Morris (News)
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