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Squeeze fear on Coke China buy
04.09.08
A day after Coca-Cola announced a landmark deal to buy China's top fruit-juice company, doubts are emerging that Beijing regulators will allow the sale to proceed.
Shares of China Huiyuan Juice Group fell in Hong Kong on fears the $2.3 billion (£1.29 billion) takeover will be blocked by the competition watchdog.
The purchase would double Coca-Cola's share of China's fruit-juice market. It already has a 10% share of the fruit and vegetable juice market in the country, and Huiyuan controls about 43% A new anti-monopoly law in China took effect on 1 August, and analysts see the Coke deal as a crucial test case.
The law limits market share to 50% for a single company while protecting “famous brands” such as Huiyuan from foreign acquisition.
“We do not see significant reasons why the authorities would approve this deal, allowing a major acquisition by a foreign firm of a highly visible domestic company in a visible industry,” Donald Straszheim, vice chairman of US investment bank Roth Capital Partners said.
