Coca-Cola China Juice Deal Shot Down

by Darren

The Chinese government has ruled against a $2.4 billion takeover of local juice giant Huiyuan Juice.

China’s Ministry of Commerce decided against the deal, saying it would limit Chinese consumer choice. The deal would have been the largest ever takeover of a Chinese company.

“We are disappointed, but we also respect the MOC’s decision,” said Muhtar Kent, president and chief executive officer of Coca-Cola.

Kent further stated that Coca-Cola had a long term interest in the Chinese market and would work along those lines. The decision could prove significant on several fronts.

The case was the first test of China’s anti-monopoly law. It also shows investors that China may be taking a protectionist attitude towards trade, despite proclamations to the contrary.

Certainly it could cause direct foreign investment in China to dwindle, if companies perceive the market as difficult to operate in. The ruling said that the Coca-Cola deal might help “squeeze out” smaller players in the juice market. Of course that will also be likely in the event of increased competition by any number of foreign players.

Coca-Cola had already planned on spending $2 billion in China in the next three years, in addition to the juice deal.

Some in China are worried that Chinese companies will now have a hard time engineering takeovers of foreign companies as a result of the decision.

“The issue will likely give other countries an excuse to reject China’s investments overseas. Though it seems that the decision can protect the domestic industry in the short term, for Chinese companies looking for overseas expansion, they may lose the best timing and prices to acquire assets,” said TX Investment Consulting Co analyst Shi Jiangang.