American beverage giant PepsiCo is betting big in China with the announcement of an intention to buy a 26 percent stake in the region's second-largest health food producer.
The beverage and snacks company apparently hopes to increase its Chinese ties as it pushes for more exposure in one of the world's largest consumer market.
According to a filing submitted to a Hong Kong exchange on Friday, Natural Food revealed that PepsiCo intends to buy a total of 566.5 million of the company's shares. PepsiCo is apparently willing to pay a 1.1 percent premium above Natural Food's closing price last week.
The purchase of the shares at HK$1.80 per share will cost PepsiCo $131 million in total.
The number of shares that will be purchased by the company will be equivalent to a 25.8 percent stake of Natural Food. When the purchase pushes through, PepsiCo will become Natural Food's second-largest shareholder.
Natural Food chairman, Gui Changqing, mentioned in a statement that the purchase of the company's shares will be PepsiCo first strategic investment in China. Gui expressed his enthusiasm over the partnerships and mentioned that the "multidimensional" tie-up will be a great advantage to both firms as it will encompass various aspects of their respective businesses such as brand building, sales, distribution, and product development.
PepsiCo's Greater China CEO, Ram Krishnan, has reportedly pledged to work closely with Natural Food to further enhance the company's productions, distribution, and logistics in the region. PepsiCo did not comment further on its planned purchase.
Natural Food is currently China's second-largest health food producer in terms of total sales. The company is trailing behind Nanfang Black Sesame and is in the running to take the top position if its growth trend continues. The company, along with its various subsidiaries, produces and distributes different healthy food products including those made from grains, dried fruits, nuts, and beans.
In 2018, Natural Food reported sales of $264.2 million, which was a 15.4 percent increase from the previous year. The company's net profits for the year also jumped by 13 percent compared to its net profits for 2017.
The company has so far managed to capitalize on the growing health food trend in China, a trend that grew by more than 13 percent last year. Following news of the large stake acquisition, Natural Food share prices surged by as much as 35 percent by the end of trading last week. The stock is expected to surge even further this week as both companies finalize their deal.
