Coca-Cola to address anti-trust fear on Huiyuan deal

HONG KONG: Coca-Cola Co plans to seekapproval under China's antitrust law for its $2.5 billion bid for top domesticjuice-maker China Huiyuan Juice Group , the final obstacle to what would be thelargest foreign takeover of a local firm, Huiyuan said on Wednesday.

Analysts and lawyers say the application will be closely watched asthe first case to be heard under the nascent law. Fears that the deal -- whichcritics say would mark the loss of a local champion to foreign control -- couldbe derailed under the anti-monopoly regulations, helped push shares in ChinaHuiyuan Juice Group down 13 percent from its year high on Sept 3, struck afterthe purchase was announced. [ID:nSHA136522]

"This will be the veryfirst case under China's antitrust law, implemented on August 1," Huiyuan'schief financial officer Francis Ng told reporters in a news conference. "Theoffer price had been carefully considered by both the buyer and the sellers,"said Ng, when asked whether he thought the offer price was fair. Huiyuan willcooperate fully, he added. He would not comment on how long it might take thecommerce ministry to make a ruling.

The Chinese firm posted a 7.2percent rise in first-half net profit to 367.3 million yuan ($53.71 million),lagging the scorching pace of 2007 -- when net profit nearly tripled -- becauseof mounting raw material costs, a May earthquake and severe winter snowstorms.Its first-half was also inflated by a pure accounting profit of 254 millionyuan, derived from changes in the fair value of convertible bonds.

Still, Coca-Cola, looking to make inroads into a pure-juice segmentof the market it is absent in and shoring up its lead in the overall domesticbeverages industry, is paying three times the market price for the HongKong-listed Chinese firm.

Huiyuan had 44 percent market share bysales value in China's pure juice sector and 42 percent of the nectars market in2008's first half, based on AC Nielsen data cited by the company. The company isexpanding its production capacity to tap the fast-growing juice market in China.It will be able to make 2.9 million tonnes of juice products a year by the endof 2008, up from 2.56 million tonnes at the end of June.

Huiyuanshares eased 1.3 percent on Wednesday to HK$9.77, well below Coca-Cola's offerof HK$12.2 each. But they outperformed a 1.6 percent fall in the blue-chip HangSeng Index <.HSI> and the index for Chinese firms listed in Hong Kongwhich lost nearly 2 percent. "The partnership with Coca-Cola will furtherdevelop the Huiyuan brand in a competitive global beverage market and provide alarger and more competitive platform for Huiyuan's business and employees,"Huiyuan Chairman Zhu Xinli said in a statement late on Tuesday.