4 September 2008

Coke swings juicy deal in China

In a move to expand into the growing China market, the world’s largest beverage company, Coca-Cola Co., will pay $2.5 billion to pick up juice maker China Huiyuan Juice Group Ltd.

Coke's wholly-owned subsidiary Atlantic Industries will purchase the Chinese company's shares for $1.56 (HK$12.20) each, almost triple their last closing price, the companies said in a joint statement to the Hong Kong stock exchange. That would value the Beijing-based juice producer at $2.3 billion (HK$17.9 billion).

In addition, Coca-Cola will pay for all outstanding convertible bonds and options, bringing the total to as much as $2.51 billion (HK$19.6 billion).

Coke began operating in China in 1979, but this would be the largest deal in its history in the country.

Huiyuan is China’s leading maker of pure fruit juices and nectars with about 31 production facilities.

“This acquisition will deliver value to our shareholders and provide a unique opportunity to strengthen our business in China,” said Coca-Cola Chief Executive Muhtar Kent.

In an effort to increase the Chinese juice maker’s reach, Coke can ad its distribution and supply network along with management and strategies to help develop Huiyuan’s brand.

With the deal, there are synergies that should drive operational and cost efficiencies, particularly in Huiyuan’s production footprint and in The Coca-Cola Company’s distribution and raw material purchasing capabilities, the companies said in a statement.