Swiss food giant Nestle said on Monday it had agreed to take a majority stake in Chinese sweetmaker Hsu Fu Chi for 1.4 billion francs (1.2 billion euros, $1.7 billion).

"Under the proposed agreement, Nestle intends to acquire 60 percent of Hsu Fu Chi whilst the Hsu family will own the remaining 40 percent," said Nestle in a statement.

The Swiss group will offer 4.35 Singapore dollars ($3.56, 2.50 euros) for each share of Hsu Fu Chi, which is listed on the Singapore stock exchange. This would be 24.7 percent above the firm's six-month average share price.

It added that it has secured approval for the deal from the Chinese firm's two largest independent shareholders -- Arisaig Partners which holds 9.0 percent and subsidiaries of the Baring Asia Private Equity Fund which hold 16.5 percent of the firm.

Nestle chief executive Paul Bulcke said the partnership would boost the group's presence in China.

"It also demonstrates our long-term commitment to China and enhances our ability to grow our portfolio of international and local brands in this dynamic market," added Bulcke.

Hsu Fu Chi's chief executive Hsu Chen meanwhile pledged to "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."

The Chinese sweetmaker's net profit for the quarter ending March 31 reached 206.6 million yuan (22.0 million euros, $32.0 million), with revenues at 1.5 billion yuan, according to its latest income statement.

The firm operates four large-scale factories in China and employs 16,000 people.

Euromonitor analysts noted that Nestle's stake in Hsu Fu Chi would make it the second largest confectionery player in China by retail value sales.

"The combined retail value market share expected to exceed 6 percent of the dynamically growing Chinese confectionery market," they said, adding that the market is expected to grow $2.1 billion over the next five years.

Zuercher Kantonalbank analysts said Nestle has paid "a high price" for the stake, but noted that this price is mitigated by "the strategic importance of China and the fact that Nestle is able to finance the acquisition without any problems."

This marks Nestle's second big acquisition. In April, it said it had acquired 60 percent of Chinese firm Yinlu Foods Group, which makes ready-to-drink peanut milk and ready-to-eat canned porridge.

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