Ever since China established
new regulations governing acquisitions by foreign entities two years ago, there's been talk about the
wide latitude the rules give officials -- and speculation about how they'll be applied. With Wednesday's news that Coca-Cola Co. intends to buy China Huiyuan Juice Group Ltd. for $2.4 billion, it looks like we're about to see a case study.
Coke has agreements with the two main shareholders -- Zhu Xinli, founder, president and 42% owner of Hong Kong listed Huiyuan, and Danone SA, which owns a 23% stake. But regulatory approval is not certain for what is reportedly the largest foreign acquisition yet in China. (Foreign banks have made big investments in Chinese ones, but those were minority stakes.)
According to Mei Xinyu, a researcher at a government think-tank quoted by Xinhua,
approval may not be easy to get. Mei cites two concerns. The first is antitrust, since these are two large companies. The second is a provision that has worried foreign dealmakers since the new rules took effect in 2006: the requirement for a special filing if a deal involves the transfer of famous trademarks or traditional Chinese brands.
But surely none of this was news to Coke or to its legal advisers at Skadden, Arps, Slate, Meagher & Flom LLP, which opened a Beijing office in 1991. The huge marketing push by Coke at the recently concluded Beijing Olympics no doubt won it some goodwill as well.
It's also noteworthy that founder Zhu will stay on as honorary chairman; that a Huiyuan spokesman says manufacturing operations won't be affected; and that Coke CEO Muhtar Kent said: "We are strongly committed to building on the Huiyuan business' current brand, improving the utilization of its fixed assets and enhancing opportunities for employees of the Huiyuan business."
Sounds a little InBev SA's pitch for Anheueser-Busch Cos., doesn't it? -
Kenneth Klee
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