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Coca-Cola offers $2.3b bid for Huiyuan

By Zhou Yan (China Daily)
Updated: 2008-09-04 07:08

SHANGHAI: The world's biggest beverage maker Coca-Cola has offered to buy China's Huiyuan Juice for $2.3 billion, 300 percent more than its last closing price.

The Atlanta-based company would acquire Hong Kong-listed Huiyuan for HK$17.9 billion, or 12.20 cents per share - almost triple Huiyuan's Friday closing price of HK$4.14. Huiyuan shares soared 164.3 percent Wednesday to close at HK$10.94.

Stock analysts in China said the high offer price reflects the premium on Huiyuan's brand in the Chinese market.

"The offer was not overly generous considering the potential for Coca-Cola as owner of the brand," Huang Dejun, general manager of Beijing Orient Agribusiness Consultant Co Ltd, said.

Huiyuan juice on sale at a super market in Shanghai.

Huang said Huiyuan will likely try to catapult onto the global market via Coca-Cola's network.

The global beverage maker said it will use its brand to develop Huiyuan, if the bid is successful.

Brenda Lee, Coca-Cola's public affairs director, said the price was reasonable, based on its own market research.

"Huiyuan is a long-established and successful juice brand in China and is highly complementary to the Coca-Cola China business," Muhtar Kent, president of Coca-Cola Co, said.

Beijing-based Huiyuan is the largest fruit juice company in China, with a share of over 46 percent in the 100 percent pure juice market last year, according to ACNielsen figures.

It posted sales revenue of 2.7 billion yuan in 2007. The company held an initial public offering on the Hong Kong stock exchange last year.

"The acquisition will deliver value to our shareholders and provide a unique opportunity to strengthen our business in China, especially since the juice segment is so dynamic and fast-growing in China," Kent said.

China's juice consumption is increasing, but juice beverages still account for less than 10 percent of the overall beverage market, Huang said.

But he expects that figure will reach 40 percent in 10 years, based on the average 50 percent market share in developed countries.

Analysts said Coca-Cola's lackluster performance in North America has spurred its aggressive expansion in the growing Chinese market.

It posted a 9 percent drop in operating income in North America in the second quarter on higher costs at its finished goods businesses.

But its unit case volume in China, by contrast, increased 13 percent in the same period, according to its interim financial report.