Coca-Cola's Biggest Buy in China Needs Antitrust Approval

The world's largest beverage maker Coca-cola Company has offered 2.4 billion dollars to buy over China's biggest fruit juice producer, Huiyuan Juice Group Limited.

The offer of HK＄12.20 (1.56 dollars) per share, and an equivalent price for outstanding convertible bonds and options, for the Hong Kong-listed Huiyuan was publicized through a joint announcement released on Wednesday (Sept 3) to the Hong Kong Stock Exchange (HKSE).

The 28-page statement said the purchase would be subjected to Chinese antirust investigation and approval from regulatory bodies for the Anti-Monopoly Law, which came into effect on Aug 1.

It would be the largest purchase Coca-Cola has made thus far in China, and once materialized, Huiyuan would withdraw from the HKSE.

Antitrust Approval Needed
The last closing price prior to the announcement for Huiyuan's share was HK＄4.14 (53 cents) each, and that would make the offer at HK＄12.20 per share to bring about a premium worth 195%. And if compared to the HK＄6 (77 cents)per share when Huiyuan was first listed on February 23, 2007, the premium had doubled.

Huiyuan had on Sept 1 issued a statement to suspend the trading of its shares, pending the release of an announcement pursuant to the code of takeover and mergers.

The trading of its shares resumed on Sept 3 along with the announcement, which excited investors and by closing time, the prices had soared to HK＄10.94 (1.4 dollars) from HK＄4.14 per share, a 164.5% jump in a day.

Coca-cola president and CEO Muhtar Kent said in a news release that the pending acquisition would strengthen the company's business in China, especially since the juice segment was so dynamic and fast growing in China.

The news release stated that Coca-Cola had been operating in China since 1979, with numerous sparkling drinks, juice, and ready-to-drink tea and coffee brands under its banner.

Coca Cola China vice president Li Xiaojun told reporters that the company was compiling material for an antitrust filing to the Chinese Ministry of Commerce, adding there was no specific information yet on how long the process would take.

Huiyuan's Future
Following the acquisition's joint announcement, Huiyuan's second largest shareholder Groupe Danone, which owns 22.98% stakes, also released a stament on Sept 3, saying it had reached an agreement with Coca-Cola to dispose of the Huiyuan shares it held to the latter.

Huiyuan public relations director Qu Bing told the EO that the acquisition was still at an early phase, and the company's current management team, operation targets and brand would remain.

Coca-Cola had also reassured to maintain Huiyuan's mode of operation after the takeover until further assessment. As Coca-Cola president Muhtar Kent said in the above-mntioned news release: "I'm very pleased that the current Chairman of the Huiyuan business, Mr. Zhu (Xinli), has agreed to take up the role as Honorary Chairman."

"We are strongly committed to building on the Huiyuan business' current brand, improving the utilization of its fixed assets and enhancing opportunities for employees of the Huiyuan business," he added.

Zhu Xinli was the founder, chairman and president of Huiyuan. Prior to the acquisition, he was the biggest shareholder of Huiyuan Holding with 41.53% of stakes.

Zhu had once voiced his business plan: "Learn from Coca-cola and Pepsi, and then surpass them." Thus, the latest Coca-Cola's acquisition rather surprised Chinese business circle.

Earlier this year, Zhu had told the media that upon entering the capital market to raise funds, Huiyuan had been able to grow bigger and stronger, and had acquired the talents and skills to compete with multinationals.

He had also expressed hope for more domestic competitors to emege and make the fruit juice market more vibrant. Huiyuan had already obtained the biggest domestic market share in packaged pure fruit juice sector.

In the Sept 3 joint annoucment Zhu committed that for a period of two years from the date on which the share offer unconditionally commenced, he would not, directly or indirectly, engaged in businesses that would come into competition with the core business of Huiyuan Group, other than the milk industry.

Translated by Lin Li, Ren Yujie