China rejects Coke bid to buy juice maker
March 18, 2009
The Associated Press reports that China rejected Coca-Cola Co.''s $2.5 billion bid to buy a major Chinese fruit juice maker in a closely watched case that stirred nationalist opposition to the sale of a successful homegrown brand to foreigners. Coca-Cola''s purchase of Huiyuan Juice Group Ltd. was rejected on anti-monopoly grounds, the Commerce Ministry said. It would have been the biggest foreign acquisition of a Chinese company to date. Coca-Cola Chief Executive Muhtar Kent said Coke would now focus on existing brands and innovation of new brands, including juices. Kent reiterated the company''s plan to invest $2 billion in China over the next three years to open new plants and distribution channels. Huiyuan''s founders and major shareholders had endorsed the sale as a way for the company to improve product development and marketing. Coca-Cola''s offer for Huiyuan ignited an outcry by nationalists who objected to the foreign takeover of a major Chinese brand. Huiyuan defended the deal as being in the best interests of the Chinese economy. Rival juice producers complained it would give Coca-Cola too much dominance in China''s beverage market. Huiyuan has 42 percent of China''s pure juice market and its green cartons of orange, apple, pear and grape juice are in supermarkets throughout the country. Communist leaders routinely defy public opinion in their decisions but they might have shared public distaste for the sale because it collided with their goal of building major Chinese companies to dominate domestic industries. The global economic crisis might have hardened government opposition. There is no way for Coca-Cola to appeal the decision, according to a Commerce Ministry official. The law forbids mergers that hurt competition but leaves regulators wide discretion in deciding how to determine that. The European Chamber of Commerce in China said it was closely watching the case and hoped the government would give a detailed explanation of reasons for the rejection. A competitive market "can best be achieved by welcoming more international investors into the Chinese market," the chamber said in a statement. Beijing issued rules in 2006 that bar foreign ownership of companies in power generation, weapons and other industries, but fruit juice makers are not mentioned.