Hsu Fu Chi, listed on the Singapore stock exchange, requested that trading of its stocks be suspended from Monday "to avoid abnormal fluctuation over the company's shares price and maintain shareholders' interests."
At the end of the trading day in Singapore, the Chinese firm, which has a market capitalisation of about $2.6 billion, issued a statement to confirm negotiations with Nestle.
"The company wishes to inform shareholders of the company that it has engaged in preliminary confidential discussions with Nestle S.A. in relation to a possible transaction relating to the company, which may or may not lead to an offer being made for the shares of the company," it said.
The negotiations surrounding the purchase of Hsu Fu Chi have been described as delicate, and a deal is not expected for weeks, according to the Wall Street Journal, which cited a person close to the issue.
Hsu Fu Chi's net profit for the quarter ending March 31st reached 206.6 million yuan (€22 million), with revenues at 1.5 billion yuan, according to its latest income statement.
For the year ending June 30th, 2010, profits were at 602.2 million yuan and revenues at 2.0 billion yuan.
Nestle was not immediately available for comment.