Nestle chooses JPMorgan to supervise the sale of Yinlu Foods Group

Nestle chooses JPMorgan to supervise the sale of Yinlu Foods Group

  • Nestle chooses JPMorgan to supervise the sale of Yinlu Foods Group.
  • Nestle's potential sale of Yinlu Foods Group values the Chinese unit at $1 billion.
  • Nestle in talks with Hangzhou Wahaha Group Co., Dali Foods Group Co., and Uni-President China Holdings Ltd., to sell Yinlu.

Nestle is all set to divest its Yinlu Foods Group. According to the sources, the food giant has hired JPMorgan Chase & Co. to oversee the sale that values the Chinese unit at $1 billion.

The sources also highlighted that Nestle is currently in talks with Chinese companies like Hangzhou Wahaha Group Co., Dali Foods Group Co., and Uni-President China Holdings Ltd., to finalize the sale of its Yinlu unit.

Nestle To Keep A Minority Stake In Yinlu Following The Divestment

As per the report, Nestle is planning on keeping only a minority stake in the Chinese unit as it co-manufactures Nestle’s Nescafe ready to drink coffee in China. Its majority stake will be opened for the 1st round of bidding by the start of May. The recent outbreak of Coronavirus in China that is wreaking havoc on global business operations, however, can push the process a little further.

Popular for its Chinese porridge (ready-made), Nestle had decided to acquire Yinlu Foods Group in 2011. The move was originally directed at capitalizing on the rising demand in mainland China. But the acquisition only resulted in sluggish growth for the Swiss company in the subsequent years.

Taking over the role of the CEO in 2017, Mark Schneider has been working committedly to optimize Nestle’s portfolio. Schneider’s strategy saw the company divesting a number of non-profitable businesses like that of dermatology and ice-cream (U.S).

In 2019, Nestle revealed its restructuring and associated costs to have increased sharply to £2.19 billion attributed largely to writing down the value of the Yinlu Foods Group. According to Nestle’s CFO, Francois-Xavier Roger, Yinlu’s reputation with Nestle is not all negative as it contributes significantly to sustain Nestle’s lead in the Chinese market for ready to drink coffee.

Nestle Lost 6.4% In The Stock Market On Thursday

The sources further added that it is currently too soon to speculate the specifics of the sale that are likely to change over time. Representatives for JPMorgan and Nestle refused to comment on the news at this stage.

Following the announcement on Thursday combined with the rising complications of Coronavirus that plunged global stocks, Nestle was seen trading 6.4% down earlier today. Part of the loss, however, was recovered later on Thursday. At the time of writing, the Swiss company is exchanging hands at 92.76 CHF in the stock market that translates to over 10% decline in 2020 so far.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.