Coke seeks Chinese juice company

Janet Babin Sep 3, 2008

Coke seeks Chinese juice company

Janet Babin Sep 3, 2008


KAI RYSSDAL: Officials at a Chinese juice company called Huiyuan are probably enjoying a Coke and a smile right now. A really big smile.

Today Coca-Cola offered almost $2.4 billion for the company. The all-cash deal comes with a hyper-caffeinated premium. It’s worth three times Huiyuan’s closing price Friday.

It would be the biggest foreign takeover ever of a Chinese company. But regulators in Beijing could take the fizz out of the deal.

Marketplace’s Janet Babin reports from North Carolina Public Radio.

JANET BABIN: China is already Coke’s fourth-largest market. But with commodity prices rising and carbonated soda sales flat, this acquisition would give Coke a stronger foothold in the global marketplace.

Gregg Warren is an equity research analyst with Morningstar:

Gregg Warren: Based on the early reports, it looks like combined they’ll have about 40 percent of the Chinese juice market wrapped up.

That would let the company practically name its price for fruit and other ingredients.

Warren says the jaw-dropping offer price may be too high. But other analysts point out China’s juice market is growing at 15 percent a year.

Consultant Tom Pirko with Bevmark says that’s because of China’s expanded middle class.

Tom Pirko: There’s just so much more disposable income. And when you can’t breathe the air you begin to think of your health, so you start thinking about fruit juice.

Pirko says Coke’s timing is ideal. Its sponsorship of the Beijing Olympics bought Coke some good will. But it may not be enough to overcome China’s antitrust and brand-protection laws.

Donald Straszheim is with Roth Capital Partners.

Donald Straszheim: Just because Coke is a well-known name, and just because they sponsored the Olympics is not going to count for much when the bureaucrats review this deal.

That review process is expected to take months.

I’m Janet Babin for Marketplace.

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