China Foods Ltd. has announced the sale of its confectionery business to Tops Properties.

According to the agreement, China Foods will transfer its equity interests in Prized Development Ltd. and shareholder's loan to Tops Properties for RMB 611M ($93.67M).

Prized Development and its subsidiaries make up part of China Foods' confectionery business. The agreement involves the transfer of both the production of chocolate and other confectionery products (handled by Prized Development and its subsidiaries through Le Conté Food) and sales and distribution (performed through COFCO Food Sales & Distribution).

Once the transaction is finalized, Tops Properties will own 100 percent of Prized Development and will indirectly hold 100 percent of Chocolate China, BVI 102, Le Conté Food and 90 percent of Le Conté Marketing.

Unaudited financial information shows that Prized Developments operated at a loss in the six months ending June 30, 2015, generating a loss of HKD 39.8M ($5.13M). China Foods states that the sale is part of a business strategy to improve its business operations and maximize returns to its shareholders.

Due to the intense market competition of the chocolate industry in mainland China and the lack of economies of scale in the confectionery business in the transaction, China Foods' management expects that the "loss-making" business may not turn around in the near future.

COFCO Corp., a wholly state-owned company established in China, is the controlling shareholder of China Foods. Tops Properties is a wholly-owned subsidiary of COFCO Property, which is 45.67 percent owned by COFCO.