Mar 18
China Rejects Coca-Cola Bid to Buy Huiyuan
China’s Ministry of Commerce announced on Wednesday that it has rejected a bid by Coca-Cola to acquire China’s top juice maker Huiyuan, saying the takeover could stifle competition and harm the growth of small juice makers in China.
In a statement posted on its website on Wednesday, the ministry says it rejected the $2.4 billion bid in accordance with China’s Anti-Monopoly Law. This is the first offer rejected since China’s Anti-Monopoly Law took effect last August.
The ministry says in its statement that if the takeover went ahead, Coca-cola could use its dominant position in the carbonated soft drinks market to promote its fruit juices through tied selling. Consumers may eventually have fewer choices and be forced to accept higher prices. The deal would also harm the growth of small and medium-sized fruit juice makers in the country.
The ministry said that Coca-cola submitted plans to reduce the deal’s unfavorable effect on competition but the ministry was not convinced by the plans. It rejected the bid in accordance with Article 28 of China’s Anti-Monopoly Law.
Shares of Huiyuan were suspended from trading at 10:13 Wednesday morning in Hong Kong after slumping 19 percent following reports Coca-Cola may scrap its bid for Huiyuan.
China Huiyuan Juice Group Ltd. requested the suspension pending the release of an announcement relating to price sensitive information, the company said in a statement.
Coca-Cola proposed to purchase Huiyuan for a steep premium on Sept 3, 2008, marking the largest foreign takeover of a Chinese company. It submitted an application for anti-monopoly approval to the Ministry of Commerce in December.
The offer price of HK$ 17.92 billion is the US beverage giant’s most aggressive move in China since the company started its operations in the country in 1979.
The transaction has been closely monitored in China as the acquisition may have become the first major test case since the country’s anti-monopoly law took effect on August 1, 2008.
According to ACNielsen, Huiyuan controls over 40 percent of China’s pure juice market. Analysts say that as a long-established juice brand in China, Huiyuan is highly complementary to the Coca-Cola China business. They believe that since Coca-Cola dominates the Chinese diluted-juice market, it hopes to make inroads into the pure-juice sector.
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