Nestle SA, the world's largest food company, agreed to acquire a 60 percent stake in China's Yinlu Foods Group in a transaction that will increase its sales in the Asian country by about a quarter.

Nestle didn't disclose the purchase price, which Helvea AG analyst Andreas Von Arx estimated to be about 1 billion Swiss francs (US$1.1 billion). Yinlu Chairman Chen Qingyuan will continue to lead the Chinese company in the partnership, Switzerland-based Nestle said yesterday in a statement.

The acquisition fits with Nestle's strategy of expansion in emerging markets, where the company is generating the strongest growth. The KitKat maker last week reported a 6.4 percent increase in so-called organic revenue for the first quarter, led by a 12 percent gain in developing regions.

"With a complementary product range in a market where Nestle needed to strengthen its positioning, this looks like a perfect fit," Von Arx wrote of Yinlu. The analyst, who has an "accumulate" rating on the stock, said the purchase is "easily financeable given Nestle's strong balance sheet."

Nestle received more than US$28 billion last year from the sale of its majority stake in eye-care company Alcon Inc.

Yinlu, which markets ready-to-drink peanut milk and ready-to-eat canned rice porridge, posted 2010 sales of about 750 million francs, according to the statement. Nestle has annual revenue of about 2.8 billion francs in China, where Yinlu is co-producer of the Swiss company's Nescafe coffee.

"Yinlu will significantly increase Nestle's presence in China," Jean-Philippe Bertschy, an analyst at Bank Vontobel, said in a note yesterday. "The Yinlu products fit in Nestle's strategy of nutrition, health and wellness."

Nestle operates 23 factories in China, where it sells KitKat and local brands including Haoji and Totole. The Swiss company has operated for about 20 years in the Asian country.

The purchase of the controlling stake in Yinlu "demonstrates our long-term investment in China and our commitment to further developing local brands," Nestle CEO Paul Bulcke said in the statement.

Nestle shares were little changed at 52.60 francs as of 10:18am in Zurich.