Coca-Cola Huiyuan Deal: Yes or No?
China has debated the role of foreign investment in its economy with a varying degree of intensity for many years, and a more restrictive view of foreign investment seems to be gaining traction. The Antimonopoly Law seems to be a good example. The law contains provisions that some mergers and acquisitions could be reviewed and halted in the name of national security, echoing earlier Chinese government rules calling for review of foreign acquisition of certain Chinese enterprises to judge whether they endanger national economic security.
Coca-Cola Co. plans to seek approval under China’s antimonopoly law for its $2.5 billion bid for top domestic juice maker Huiyuan, the final obstacle to what would be the largest foreign takeover of a local firm.
The European Union Chamber of Commerce in China said earlier that rising economic nationalism was deterring investment by European companies and hampering access to the domestic market. In addition it stated the Huiyuan deal would be a litmus test of Beijing’s attitude toward foreign business.
Reuters has a backgrounder from a few days ago:
Some industry experts argue Beijing has no interest in killing a non-sensitive deal, but others say a public outcry will have regulators scurrying to protect a beloved national brand.
Chen Yuan, a lawyer at legal firm Linklaters, argued the high-profile acquisition may tweak nationalistic sensibilities but the government is unlikely to kill the deal without good reason, partly because the world is watching…
Donald Straszheim, vice chairman of Roth Capital Partners, was skeptical the deal would be allowed noting a regulation protecting “famous brands” from foreign acquisition.
Meanwhile, the Times of London mentions the vociferous discussion in China on whether this takeover would injure national pride:
Witness the current uproar in China over Coca-Cola’s bid for the Huiyuan Juice Group, dubbed by protesting nationalists a dragon head enterprise and saying that it would be traitorous to let it pass into foreign ownership.
Will Coca-Cola be turned down via the Antimonopoly Law? We’ll soon see as the Chinese Ministry of Commerce will hand down its decision in a months’ time.
