Processing Magazine

Coca Cola bid for juice maker will undergo China’s anti-monopoly law

September 5, 2008

The Associated Press reported today that Coca-Cola Co. will have to submit its bid to buy a Chinese juice producer for review under China''s new anti-monopoly law, state television reported, setting up the first major test of the legislation. Coca-Cola''s $2.5 billion offer last week for China Huiyuan Juice Group Ltd. already has stirred nationalist opposition. Comments posted on Chinese Web sites criticized the sale as the loss of a leading company to foreign owners. The anti-monopoly law, which took effect Aug. 1, was welcomed by foreign business groups as a step toward clarifying commercial conditions in China. But Beijing has released no details of what companies must do to comply. Regulators have yet to receive a request from Coca-Cola for approval to buy Huiyuan, state television said on its Web site in a report dated Sunday. China is the world''s leading destination for foreign investment. But the purchase of established companies is still rare and politically sensitive. Taking over Huiyuan would give Coca-Cola a leading position in China''s competitive beverage market. Huiyuan is the top Chinese producer of fruit juices and analysts estimate it has about 42 percent of its market. Mergers must undergo an anti-monopoly review if the company created by the deal would have revenues of 400 million yuan ($58 million) in China or 10 billion yuan ($1.3 billion) worldwide, according to a government notice Aug. 3. The law says mergers will be blocked if they hurt competition but gives no indication of what level of market dominance is deemed unacceptable. Regulators have 30 days to issue a ruling after receiving a formal application for a merger. But they also can decide to conduct further reviews that can extend that deadline by up to 150 days. Global companies are eager to expand into China''s thriving domestic market, where consumer spending is growing at annual rates of over 20 percent. The popular Web portal said 80 percent of some 229,000 people who responded to an online poll were opposed to letting Coca-Cola acquire Huiyuan. A comment posted on a Sina bulletin board Monday called Huiyuan president Zhu Xinli a traitor, while others threatened to boycott the brand if the sale went through. Huiyuan has said it secured commitments by three large shareholders accounting for 66 percent of its shares to accept the Coca-Cola takeover.