December 19/Hershey, Pa./Business Wire -- The Hershey Company announced that its wholly owned subsidiary, Hershey Netherlands B.V., has signed an agreement to acquire 80% 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.

The 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 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% of SGM net sales are within the non-chocolate and chocolate candy segments. The remainder of SGM net sales is concentrated in 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.”

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 Zhao, 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.