China said on March 18 it had rejected a bid by Coca-Cola to acquire the nation's top juice-maker, scuttling what would have been the biggest foreign takeover of a Chinese firm. The commerce ministry said it would not allow the $2.4 billion acquisition of Huiyuan because it would have had "a negative influence on competition."
"Consumers would have been forced to accept higher prices and a smaller choice of products," the ministry said, just days before a deadline for issuing a verdict on the deal. It said Coca-Cola had made some adjustments to the planned deal in reaction to the ministry's concerns, but the changes had not been far-reaching enough.
The purchase was seen as a major first test of how China would apply a new anti-monopoly law. Concerns had emerged that the law, in force since August, would be used to bar foreign enterprises from key sectors of the economy.
"The juice industry is not a sensitive industry for the Chinese government, but it still doesn't want a foreign brand to own a major Chinese brand," said Renee Tai, a Hong Kong-based analyst with CIMB-GK Securities.
Huiyuan is one of China's most recognizable brand and boasts about 40% of the domestic market in pure fruit juices. When Coca-Cola's plans were first announced, they were met with a storm of criticism from sections of the Chinese public who were concerned about losing a valuable local brand to foreign buyers.
Huiyuan's rivals had also opposed the deal, arguing it threatened to force them out of business because Coca-Cola would take control a large share of the product distribution network, state media said.
Coca-Cola has big ambitions for China, announcing this month it would invest $2 billion in the Asian country over the next three years, separate from the Huiyuan deal, and compared with just $1.6 billion spent since 1979.
Chinese regulators have been reluctant to approve some recent foreign acquisitions. Officials in the past have used delaying tactics to stop deals without formally rejecting them. In July, U.S. private equity firm Carlyle Group abandoned an attempt to buy a stake in Chinese construction machinery maker Xugong Group after waiting three years for regulatory approval.
There was no immediate reaction to the commerce ministry's decision from either Coca-Cola or Huiyuan. However, the European Chamber of Commerce issued a statement calling for the government to allow more international investors into the Chinese market by easing restrictions, lowering barriers and allowing greater transparency.
Copyright Agence France-Presse, 2009