Mar. 19 – Coca-Cola’s bid to acquire China Huiyuan Juice Group was rejected under the anti-monopoly review conducted by the Ministry of Commerce on grounds that the deal would affect or limit competition and was not conducive to the development of the country’s juice industry.
“Coke may have taken advantage of its leading position in soft drinks to restrain competition in the juice market, forcing consumers to pay higher prices and leaving them fewer options,” the ministry announced on its website. “It also could have squeezed China’s small and medium-sized juice makers out of the market.”
If the deal had gone through, the US$2.4 billion acquisition would have been the largest takeover of a foreign company in the China’s food and beverage industry. The Huiyuan brand is the country’s leading maker of pure fruit juices with 42 percent market share. It would also have been Coke’s biggest overseas purchase.
This case was closely watched because it was the first major case to go under review since the implementation of the China’s anti-monopoly law last August and should set the tone on how far China will go to allow foreign investment.
Merger-and-acquisition lawyers not involved in the deal told WSJ that the ministry’s statement indicates that officials relied on broader definitions of anti-competitive harm compared to their counterparts in the United States, implying that overall size, in addition to marketshare was taken into account.
Last Wednesday, the Finance Ministry announced new rules that will make it more difficult for foreign investors dealing in financial-services businesses to buy or sell stakes.
The rejection of the Coke-Huiyuan deal could affect Chinese bids to acquire overseas companies at depressed world prices. In particular, the huge pending Chinese investments in Australia’s mining sector with opposition to Rio Tinto’s US$19.5 billion merger with China’s Chinalco.
Beijing has been loosening regulations to encourage more Chinese companies to purchase assets abroad, specifically in the industries of oil, metals and other natural resources.