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On Wednesday we observed that Coca-Cola Co.'s proposed acquisition of China Huiyuan Juice Group Ltd. for $2.4 billion will be a
regulatory trailblazer in that country. Since then there's been a lot more coverage of the topic, and opinion on how Coke will fare with Chinese authorities varies widely.
The range of opinions isn't surprising. This is the largest foreign takeover yet in China. And the rules there, or at least the application of them, are very much a work in progress. One important set of changes
took effect just two years ago. And a new antitrust law -- which came into effect on Aug. 1 --
splits responsibility for enforcement among three separate government entitities, according to a handy summary at ChinaStakes.com.
So what are the
experts saying? Reuters talked to several. Lawyers at Linklaters LLP and Jones Day think the deal will pass the antitrust test, since the drinks market remains fragmented. But they also reckon that the government will take its time -- at least 180 days, and the agreement reportedly expires after 200 days. Coke hasn't submitted documents yet, the report says.
On the other hand, there has been some negative popular reaction to the deal, on the grounds that a major Chinese brand is falling into foreign hands. The 2006 rules give authorities scope to protect Chinese brands if they're deemed important enough, and a couple of bankers told Reuters they think that's what will happen here. As Agence France Presse notes,
one possible scenario is for regulators simply to stall, for political reasons, until the deal collapses.
Coke has stressed it wants to build the Huiyuan brand, not replace it. As we noted last time, it's the same pitch InBev SA made when winning Anheuser-Busch Cos. In that project InBev CEO Carlos Brito campaigned on two fronts, winning over shareholders and smoothing the way with the public and the authorities.
Of course, the challenge for Coke CEO Muhtar Kent isn't entirely parallel. The main shareholders are already on board. Kent needs to reassure the public and persuade several different government agencies, in a country where nationalism runs strong and legal structures are new. Some are skeptical that Coke's Olympic sponsorship will help it here. But it's at least a good start. -
Kenneth Klee
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