HERSHEY, Pa. (AP) — The Hershey Co. is expanding its presence in China with the acquisition of a majority stake in a confectionary company there.
The U.S. candy maker announced overnight that its subsidiary, Hershey Netherlands B.V., is acquiring an 80 percent stake in privately held Shanghai Golden Monkey Food Joint Stock Co. Ltd. for about $498 million in cash. Hershey will also assume $86 million in debt.
The deal is expected to close in the second quarter pending regulatory and Shanghai Golden Monkey shareholder approval.
Hershey is making an effort to increase its international presence to better compete against international players like Mondelez, which split from Kraft Foods last year. A big motivation for that split was a push to get snacks and candy into fast-growing overseas markets.
Hershey has increased its investment in China over the past several years. In May, the company opened a new Asia Innovation Center in Shanghai to develop new products for the area. This acquisition will help Hershey take advantage of Shanghai Golden Monkey's existing manufacturing, brand strength and more in the region.
The Chinese company makes Golden Monkey candy, chocolates, protein-based products and snack foods. They are widely marketed across China in many cities and rural areas. It is expected to generate revenue of more than $225 million in 2013.
Janney Capital Markets analyst Jonathan Feeney said the deal will expand Hershey's capabilities in China at a reasonable price. It also gives the company a foothold in the critical milk candy segment that it had previously lacked. He expects the acquisition will prove profitable and add to its developing market sales for years to come.
Shares of Hershey, based in Hershey, Pa., increased 50 cents to $96.30 by midday Thursday amid a modest dip in the rest of the Nasdaq index.