“Shanghai Golden Monkey is the type of business we’ve been focused on for potential M&A,” says 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.”

About 75 percent of SGM net sales are within the non-chocolate and chocolate candy segments. The remainder are 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.

“The agreement between Hershey and Shanghai Golden Monkey is a win for both companies,” says John P. Bilbrey, president and ceo of The Hershey Co. “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.”

SGM’s net sales have been growing by double digits, on a percentage basis, and the company expects to generate net sales of more than $225 million in 2013.

“In less than 25 years, SGM products have become national, well-known, trusted brands in China,” says Zhao Qisan, founder, chairman and general manager of SGM. “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.”

Subject to the transaction’s approval, SGM will operate as a standalone business reporting to Alfonso.

However, many of SGM’s talented senior management team, including Qisan, have agreed to continue in their current roles alongside a few Hershey-appointed executives.

The purchase price of the deal was about $584 million (RMB 3,543.2 million).  Hershey Netherlands plans to pay about  $498 million (RMB 3,021 million) in cash and assume net debt of about $86 million (RMB 522.2 million).

The acquisition is set to be completed in two stages: 80 percent of the total outstanding shares of SGM will be acquired by Hershey Netherlands at an initial closing, which is expected to occur in mid-2014 and the remaining 20 percent of the shares of SGM will be acquired by Hershey Netherlands at a second closing, slated for the one-year anniversary of the initial closing.

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 now one of the fastest growing confectionery companies in the country.

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. The move also enhances 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.

This is in addition to the Hershey Company’s  new Asia Innovation Center, located at the Jinqiao Research Park in the Pudong District of Shanghai. It opened in the spring of 2013.

The center is a fundamental step toward accelerating the company’s growth and enabling its global capabilities to quickly develop and launch new products customized to the tastes of consumers in China and across the Asia region.

The of SGM 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.