Hershey Enters Agreement to Acquire Majority Share of Shanghai Golden Monkey Food Company
HERSHEY, Pa.--(BUSINESS WIRE)--Dec. 19, 2013-- The Hershey Company (NYSE: HSY), the largest producer of quality chocolate in North America and a global leader in chocolate, sweets and refreshments, announced that its wholly-owned subsidiary, Hershey Netherlands B.V., has signed an agreement to acquire 80 percent of the iconic Shanghai Golden Monkey Food Joint Stock Co., Ltd. (SGM), a privately held confectionery company based in Shanghai, China. Completion of the agreement is expected to occur in the second quarter of 2014 and is subject to China regulatory and SGM shareholder approval.
Hershey has increased its investment in China over the past several years and is one of the fastest growing confection companies in China. 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.
Today’s announcement builds on Hershey’s continuing commitment to the China market by providing world-class quality products to Chinese consumers. In May, Hershey announced the opening of its new Asia Innovation Center, located at the Jinqiao Research Park in the Pudong District of Shanghai. This is a fundamental step toward accelerating the company’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.
SGM manufactures, markets and distributes the well-known and award winning Golden Monkey branded products. The SGM portfolio, which also includes Golden Monkey candy, chocolates, protein-based products and snack foods, is widely marketed across China in many cities and rural areas. Approximately 75 percent of SGM net sales are within the non-chocolate and chocolate candy segments. The remainder of SGM net sales is concentrated in the fast growing protein-based bean products and other snack categories. SGM manufactures products in five cities and has more than 130 sales offices, approximately 1,700 sales representatives and about 2,000 distributors covering all regions and trade channels in China. SGM’s net sales have been growing double digits, on a percentage basis, and the company is expected to generate net sales of more than $225 million in 2013.
“The agreement between Hershey and Shanghai Golden Monkey is a win for both companies,” said John P. Bilbrey, President and Chief Executive Officer of The Hershey Company. “The strength of SGM’s confectionery portfolio and overall distribution capabilities, especially within the traditional trade, is an opportunity for us to leverage scale to make the iconic brands of Hershey and SGM even more powerful. Additionally, SGM’s focus on protein-based products and snacking is on-trend with Hershey’s consumer-centric marketplace insights.”
Mr. Zhao Qisan, Founder, Chairman and General Manager of Shanghai Golden Monkey, said, “In less than 25 years, SGM products have become national, well-known, trusted brands in China. 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. 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 who will have even more choices for high-quality products after this transaction.”
“Shanghai Golden Monkey is the type of business we’ve been focused on for potential M&A,” said Humberto P. Alfonso, President, Hershey International. “It fits Hershey’s acquisition criteria: it is located in our primary international market, China; it is a pure play confectionery and snacks company; and it has distribution into channels where Hershey products have yet to penetrate. Additionally, the company has a strong history of innovation and product quality as evidenced by the outstanding reputation of its core brand, Golden Monkey, which has been nationally recognized as one of China’s most iconic brands.”
Subject to the transaction’s approval, SGM will operate as a standalone business reporting to Alfonso. Many of SGM’s talented senior management team, including Founder, Chairman and General Manager Mr. Zhao Qisan, have agreed to continue in their current roles alongside a few Hershey appointed executives. Hershey will make a cash payment to the seller at the time of closing. Hershey will release additional information about the acquisition in its Form 8-K filing with the Securities and Exchange Commission. The acquisition is not expected to affect Hershey’s previously announced adjusted earnings per share-diluted outlook for 2013 and 2014 provided on October 24, 2013. Excluding integration and transition costs, Hershey expects the acquisition to be slightly accretive on an adjusted basis in 2014.
About The Hershey Company
The Hershey Company (NYSE: HSY) is the largest producer of quality chocolate in North America and a global leader in chocolate and sugar confectionery. Headquartered in Hershey, Pa., The Hershey Company has operations throughout the world and approximately 14,000 employees. With revenues of about $7 billion USD, Hershey offers confectionery products under more than 80 brand names, including such iconic brands as Hershey's, Reese's, Hershey's Kisses, Hershey's Special Dark, Twizzlers, Jolly Rancher and Ice Breakers. The company is focused on growing its presence in key international markets such as China, Mexico and Brazil while continuing to build its competitive advantage in the United States and Canada. For more than 100 years, The Hershey Company has been a leader in making a positive difference in the communities where its employees live, work and do business. Corporate Social Responsibility is an integral part of the company’s global business strategy, which includes goals and priorities focused on fair and ethical business dealings, environmental stewardship, fostering a desirable workplace for employees, and positively impacting society and local communities. The Milton Hershey School, established in 1909 by the company's founder and funded by a trust administered by Hershey Trust Company, provides a quality education, housing, and medical care at no cost to children in social and financial need. Students of Milton Hershey School are direct beneficiaries of The Hershey Company's success.
About Shanghai Golden Monkey Food Company
Shanghai Golden Monkey Food Company, formerly known as Golden Monkey Group, was established in 1996. Staffed with more than 5,000 employees, with advanced equipment and technical expertise, the company has 10 sales regions supported by 15 sales branches with 130 sales offices throughout the country and has become a leading confectionery enterprise. Its product range includes Golden Monkey candy, chocolate, protein-based products, and snack foods. The Golden Monkey brand has received numerous awards, including: “China Well-known Trademark,” “China Top Brand,” “China Top Product,” “Excellent Enterprise in Chinese Candy Industry,” “National Food Safety Demonstration Company,” “Double Golden Awards of Asia-Pacific International Food & Processing Technology Expo,” and “Golden Award of 2nd Asia-Pacific APEC International Economic Trade Expo.”
SGM’s guiding business principles include operational excellence continuous improvement. The company focuses on operating a sustainable business through its management of a diversified business portfolio. SGM has established a culture of focusing on people development, scientific innovation capabilities, and contributing to society through corporate social responsibility initiatives.
Safe Harbor Statement
This release contains statements that are forward-looking. These statements are made based upon current expectations that are subject to risks and uncertainties. Because actual results may differ materially from those contained in the forward-looking statements, you should not place undue reliance on the forward-looking statements when deciding whether to buy, sell or hold the Company's securities. Factors that could cause results to differ materially include, but are not limited to: the satisfaction of the conditions to the closing of the acquisition, including the ability of the parties to the Agreement to obtain and maintain the necessary government and regulatory approvals; the ability of SGM to operate its business in a manner at least as consistent with historical operations; difficulties with realizing the expected benefits of the acquisition, including the possibility that the acquired business may not be integrated successfully or that the benefits will take longer to realize than expected; failure to successfully execute and integrate other acquisitions, divestitures and joint ventures; risks and uncertainties related to our international operations; issues or concerns related to the quality and safety of our products, ingredients or packaging; changes in raw material and other costs; selling price increases, including volume declines associated with pricing elasticity; market demand for our new and existing products; increased marketplace competition; disruption to our supply chain; changes in governmental laws and regulations, including taxes; political, economic, and/or financial market conditions; disruptions, failures or security breaches of our information technology infrastructure; the impact of future developments related to the investigation by government regulators of alleged pricing practices by members of the confectionery industry and civil antitrust lawsuits in the United States; pension costs or funding requirements that could increase at a higher than anticipated rate; and such other matters as discussed in our Annual Report on Form 10-K for 2012. All information in this press release is as of December 19, 2013. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
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Source: The Hershey Company
The Hershey Company
Mark Pogharian, 717-534-7556
Sharon Tang, 86-21-6165-6278
Jeff Beckman, 717-534-8090