Hershey Co. on Dec. 19 entered into what analysts say could be its biggest acquisition, paying nearly $600 million for an 80 percent stake in Shanghai Golden Monkey Food Joint Stock Co. Ltd. (SGM), a privately held confectionery company based in Shanghai.
SGM manufactures Golden Monkey branded products, which Hershey called well known across China, and includes candy, chocolates, protein-based products and snack foods. Approximately 75 percent of SGM net sales are in non-chocolate and chocolate candy segments. The remainder are concentrated in what Hershey called "the fast-growing protein-based bean products and other snack categories."
SGM began in 1996 and has more than 5,000 employees. Its sales have been growing at double digits and it's expected to generate sales of more than $225 million in 2013. The company manufactures in five cities and has more than 130 sales offices.
Technically, the American company's wholly owned subsidiary, Hershey Netherlands B.V., would make the acquisition. The deal is expected to occur in the second quarter of 2014.
"Hershey has increased its investment in China over the past several years and is one of the fastest growing confection companies in China," said a company statement. "With this transaction, Hershey intends to build on the success of SGM’s iconic brands, diverse product portfolio, in-country manufacturing and growing sales force to accelerate its growth in China, enhance its ability to serve Chinese consumers, and provide increased opportunities for employees in the country. At the same time, SGM will benefit from the scale and scope of Hershey to enable the sustainable, long-term development of SGM’s trusted brands.
"This is a fundamental step toward accelerating [Hershey's] growth and enables its global capabilities to quickly develop and launch new products customized to the tastes of consumers in China and across the Asia region," said the statement.
"Hershey and SGM have similar cultures and strategies related to brand building and selling capabilities and we’re pleased that a company of Hershey’s stature sees the potential in our great company," said Zhao Qisan, founder, chairman and general manager of Shanghai Golden Monkey.
"We look forward to working with Hershey and leveraging the resources that both of us have to offer to the great benefit of Chinese consumers."
“Shanghai Golden Monkey is the type of business we’ve been focused on for potential M&A,” said Humberto Alfonso, president of Hershey International. SGM will operate as a standalone business reporting to Alfonso. Many of SGM’s senior management team, including Zhao Qisan, have agreed to continue in their current roles alongside a few Hershey appointed executives.