Beijing (AsiaNews/Agencies) – The Coca Cola Co. has launched a bid to buy out the Huiyuan Juice Group, a 122-year-old Chinese soft drink company. The cash offer by the Atlanta-based multinational is worth HK$19.65 billion (US$ 2.5 billion), three times Huiyuan’s current value. The premium is huge: HK$ 12.20 (US$ 1.60) per share against Huiyuan's closing price of HK$ 4.14 before the deal was announced.
After years of double and triple-digit growth, mainland soft-drink producers are struggling with rising costs, falling margins and a wave of consolidation that have eliminated many smaller firms.
As a market leader, Coke is well-positioned and the Huiyuan deal would broaden its footprint in what is already its fourth-largest global market.
Even though the buyout would strengthen the fruit juice segment of the market, the mainland soft-drink market as a whole has seen huge growth, 82 per cent over the past five years, to US$ 32.27 billion in retail sales last year,
Given its potential status as the biggest foreign takeover of a mainland company, regulators in Beijing are sure to look closely at the deal.
But few analysts anticipate any major difficulties or delays because it does not involve a company in strategically sensitive industries such as steel or high-technology machinery.
The US buyers should in the end be assured a deal. In fact Chinese supermarket shelves already show their products side by side (see photo).
