Nestle today (11 July) ended the speculation over its interest in Hsu Fu Chi with the announcement that it intends to buy a majority stake in the Chinese confectioner.

The world’s largest food maker has struck a deal to acquire 60% of the company, one of China’s largest confectioners, for S$2.1bn (US$1.7bn).

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News of Nestle’s interest in Hsu Fu Chi emerged last week when both sides admitted they were in talks over a possible deal.

Hsu Fu Chi was founded by four brothers in 1992 and the Hsu family own 56.5% of the business, with the remainder of the company listed on the Singapore stock exchange.

Nestle will offer S$4.35 for the listed shares, which it said equated to a premium of 24.7% over Hsu Fu Chi’s volume-weighted share price over the last 180 days.

If the offer is approved, Nestle plans to buy a further 16.5% in Hsu Fu Chi from the Hsu family’s shareholding. Nestle would then own 60% of the confectioner.

Nestle CEO Paul Bulcke said the deal would “greatly reinforce” the company’s presence in China and help the company grow its portfolio of local and international brands.

“It combines Hsu Fu Chi’s strong brands, its large portfolio of products at affordable price points, its efficient operations and entrepreneurship with our proven innovation and renovation capabilities, supported by our R&D centres in China,” Bulcke said.

Hsu Fu Chi was scheduled to issue the financial results for its most recent financial year, which ended on 30 June, next month.

The most recent annual figures show that Hsu Fu Chi made revenue of CNY4.31bn (US$666.4m) in the year to 30 June 2010, an increase of 13.8% on the year before. Net profit was up 30.8% to CNY602.2m.

Hsu Fu Chi CEO and chairman Hsu Chen, who, Nestle said, will continue to lead the company, said the Chinese firm was “delighted” to team up with the Kit Kat maker.

“Their offer is a recognition of the strength and quality of our company and a very attractive proposition for our shareholders. Together with Nestlé, we will accelerate the development of the Hsu Fu Chi brand, its production and distribution capabilities and ensure Hsu Fu Chi’s continued growth momentum and brand legacy for the future,” Hsu said.

The completion of the deal remains subject to a number of conditions, including regulatory approval in China.