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SCMP Reporter

Stock retreats 7.7pc as Coca-Cola takeover faces competition laws and government nod
Shares in China Huiyuan Juice Group fell  yesterday as doubts emerged over the regulatory approval for  Coca-Cola's HK$19.65 billion takeover offer, the largest  on the mainland.
Huiyuan, the country's top pure juice maker, dropped as much as 9.05 per cent before closing down 7.68 per cent at HK$10.10, below Coca-Cola's offer price of HK$12.20 per share.
The stock soared  164.25 per cent on Wednesday when the two companies announced the deal, which will double Coca-Cola's market share and make it No1 in the mainland's fruit and vegetable juice market.
'If the transaction cannot get the government nod and Huiyuan's share price returns to the previous level, investors will get hurt,'  one analyst said.
CIMB-GK Securities said that while the all-cash deal was straightforward, the key issues remained government approvals and anti-competition trust reviews.
Under the mainland's newly enacted anti-monopoly law, proposed acquisitions and mergers are subject to  government reviews related to anti-monopoly and national security issues.
Although the chance of the deal being blocked because of national security is slim, Beijing may be concerned about a high-profile consumer brand such as Huiyuan falling into foreign hands, particularly an American corporate giant.
Mainland consumers have already given a  thumbs down to the takeover.
According to a survey by Sina, the mainland's largest online portal, 82.21 per cent of 76,009 respondents are against the takeover as they think it will kill a national brand. Only 12.62 per cent  were in favour of the Coca-Cola purchase.
A government source said yesterday that Beijing would take public opinion into account, but it would not be a decisive factor.
Coca-Cola said it intended to keep the Huiyuan brand and Huiyuan founder and chairman Zhu Xinli, who started the firm from a near-bankrupt canned-fruit plant in Shandong province  16 years ago, would be honorary chairman.
However,  some questioned the commitment of multinationals to keeping local brands on the mainland.
They pointed to bottled water firm Robust, which suffered a sharp decline in brand recognition after being bought by Groupe Danone.
A source said there was speculation that Coca-Cola was more attracted by Huiyuan's manufacturing facilities, distribution network and the ability to secure raw material supplies on the mainland, rather than its brand.
At present, Huiyuan offers more than 200 juice products under its core brand and relies on 1,800 distributors and 1,600 sales representatives to sell to customers throughout China.
It  commands more than 40 per cent of the market by volume in the pure juice segment, according to AC Nielsen.
Yang Du, a professor of business at Beijing's Renmin University, said it was inevitable the highly fragmented industry would face consolidation, but Beijing needed to reflect on how to nurture more national brands.
'After the completion of the deal, smaller players are likely to face even more challenges than before,'  Mr Yang said.
'The focus should not be put on the political side of national brand protection, but how to groom  local brands, making them bigger and stronger [so that foreign players can't dominate the market].'



Huiyuan shares fall on deal doubts