Huiyuan Rises on Report of Coca-Cola Stake Bid

April 24-- China Huiyuan Juice Group Ltd., the country’s biggest maker of pure juice, climbed the most in a month in Hong Kong trading after the Wall Street Journal reported Coca-Cola Co.

may buy a minority stake.

Huiyuan rose 13 percent to HK$5.74 in Hong Kong trading, the most since March 25, making it the biggest gainer on the MSCI Asia-Pacific Index. The gain trimmed the stock’s decline to 31 percent since March 18, when China’s government blocked Coca- Cola’s $2.3 billion bid for Huiyuan.

Coca-Cola is exploring options for a deal with Huiyuan that will satisfy Chinese regulators, the Journal reported yesterday, citing people familiar with the situation. Coca-Cola and PepsiCo Inc., which together control 86 percent of China’s soda market, are in a race to buy juice and dairy-beverage brands in developing markets.

“The talk definitely will be a short-term catalyst to the share price,” Jacqueline Ko, a food and beverage analyst at Kim Eng Securities (Hong Kong) Ltd. said in a report today. “There are numerous challenges facing China Huiyuan going ahead due to the slowdown in demand for their core 100 percent juices and nectars as well as the stiffer competition in the juice-drink market.”

Huiyuan’s Suitors

Huiyuan said today it’s unaware of the source of newspaper reports saying it resumed discussions with Coca-Cola. The company “is not in possession of any price-sensitive information which would require an announcement,” it said in a statement to Hong Kong’s stock exchange.

Coca-Cola declined to comment on “speculation” in a statement sent by e-mail late yesterday. “We were disappointed, but we also respect the Ministry of Commerce’s decision not to approve our proposed purchase of the Huiyuan Juice business,” said the statement sent by Coca-Cola spokesman Kenth Kaerhoeg.

Zhu Xinli, chairman and president of the Beijing-based company said April 15 that Huiyuan Juice had been approached by “many more suitors” after Coca-Cola’s bid was blocked. He declined to provide further details.

“Even if Coca-Cola finally takes some minority stakes in China Huiyuan, we see that the deal is simply more beneficial to Coca-Cola and the Chairman Zhu Xinli than to China Huiyuan,” said Ko, who recommends selling the Chinese juicemaker’s shares.

China’s Ministry of Commerce has denied that its decision to block Coca-Cola’s takeover bid was aimed at protecting a national brand. The biggest foreign takeover of a Chinese company would have hurt competition by strengthening Coca-Cola’s control over China’s juice and beverage market, enabling it to abuse its dominance, the ministry has said.


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