Capitalist icon Coca-Cola today struck a deal for more than £1 billion to buy one of China's biggest drinks companies as it aims to build on its momentum in the vast country set off by its sponsorship of the Olympics.

It is paying HK$17.92 billion (£1.29 billion) for China Huiyuan Juice in the largest outright takeover of a Chinese firm by a foreign company.

The only bigger deals by foreigners have been in the banking sector, where overseas investors are only allowed to take minority stakes.

Coke already had a 9.7% share of the fruit and vegetable-juice market in the country in 2007.

Huiyuan makes the leading 100% juice and nectar brands in China and has 42% market share, Coke said.

“Huiyuan is a long-established and successful juice brand in China and is highly complementary to the Coca-Cola China business,” said Muhtar Kent, Coke's chief executive.

Coke will also benefit from a growing export market. Huiyuan has been supplying juices to Wal-Mart stores in the US since last year.

The purchase fits with Coke's recent expansion in the juice market round the world, where sales are growing faster than the company's traditional sweet fizzy drinks.

Coke is riding a wave of strong brand awareness in the country after its major sponsorship of the recent Beijing Olympics and hopes to keep the momentum of the investment.

It spent up to $90 million (£50.5 million) on supporting the Games.

Research shows it lifted its brand recognition in the country from 28% in April to more than 50%, trouncing arch-rival Pepsi which has just 8%, says market research group Mediaedge.

Coke will now add to that edge in the market with Huiyuan.

Huiyuan is about 23%-owned by French food giant Groupe Danone and 6.8%-owned by US private-equity firm Warburg Pincus & Co.

Coke will pay HK$12.20 cash for each Huiyuan share, nearly triple the stock's Friday closing price of HK$4.14.

It will buy all the outstanding shares, bonds and options of Huiyuan and take the company private after the acquisition.

Royal Bank of Scotland advised Coca-Cola on the deal while Huiyuan was advised by Goldman Sachs.
The deal still needs the approval of Chinese authorities, particularly relating to competition.