Coca-Cola, Huiyuan Juice Deal Pending Approval
CYUNF | Quote | Chart | News | PowerRating -- The Coca-Cola Company's acquisition of China Huiyuan Juice Group Ltd. has proceeded to the regulatory review and approval procedures.
China's Ministry of Commerce recently held a hearing meeting on the deal. Beijing Shunxin Agriculture Co., Ltd. (000860.SZ), Nongfu Spring and some other enterprises were invited to attend the meeting. Earlier, reports said that Shunxin Agriculture and some other companies rejected the acquisition deal between Coca-Cola and Huiyuan Juice.
The Ministry of Commerce is expected to come up with an answer before this March and there is a big chance that Coca-Cola would be nodded to acquire Huiyuan Juice.
Pursuant to the announcements of Coca-Cola and Huiyuan Juice, the Acquisition Agreement between them would expire on March 23, 2009. The buyer said that its communication with China's Ministry of Commerce is going smoothly.
Earlier, PepsiCo., Inc. (PEP), the archival of Coca-Cola, was reported to talk with Guangzhou Wanglaoji Pharmaceutical Company Limited, in an effort to compete with Coca-Cola in the non-carbonated beverage sector.
The negotiation is just at the initial stage, so it remains unclear as to in which way they will establish the cooperation. People in the drink-making circle guess that PEP is likely to buy into Wanglaoji, the herbal tea giant in China. However, Hong Kong's JDB Group has the use right of Wanglaoji brand currently, so PEP is also likely to establish the cooperation in the way of brand lease. PEP is guessed not to acquire Wanglaoji wholly; instead, it is likely to take a controlling right in Wanglaoji.
Wanglaoji was still a small brand in south China's herbal tea market in 1990s. Thanks to the efforts of JDB Group in advertising and promoting the brand, Wanglaoji has had good profitability since 2003, when its annual sales volume grew to CNY 600 million from CNY 100 million in 2002. The figure jumped to CNY 1 billion in 2004 and CNY 8 billion in 2007, with sales amount of CNY 80 million and CNYA 710 million in the two years, respectively.
Once PEP establishes cooperation with Wanglaoji, the position of JDB Group would be threatened, said analyst Chen Jing with Beijing Orient Agribusiness Consultant, Ltd. Chen, however, does not hold an optimistic view about the foreign player's participation into the herbal tea industry, as herbal tea is a traditional Chinese drink and foreign enterprises seem not to have enough experience and expertise in this sector.
(USD 1 = CNY 6.83)
Source: www.eeo.com.cn (January 07, 2009)
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