Hong Kong, Sept 10 - Coca-Cola Co plans to seek approval under China's antitrust law for its $2.5 billion bid for top domestic juice-maker China Huiyuan Juice Group, the final obstacle to what would be the largest foreign takeover of a local firm, Huiyuan said on Wednesday.
Analysts and lawyers say the application will be closely watched as the first case to be heard under the nascent law.
Fears that the deal -- which critics say would mark the loss of a local champion to foreign control -- could be derailed under the anti-monopoly regulations, helped push shares in China Huiyuan Juice Group down 13 percent from its year high on Sept 3, struck after the purchase was announced.
"This will be the very first case under China's antitrust law, implemented on August 1," Huiyuan's chief financial officer Francis Ng told reporters in a news conference.
"The offer price had been carefully considered by both the buyer and the sellers," said Ng, when asked whether he thought the offer price was fair.
Huiyuan will cooperate fully, he added. He would not comment on how long it might take the commerce ministry to make a ruling.
The Chinese firm posted a 7.2 percent rise in first-half net profit to 367.3 million yuan ($53.71 million), lagging the scorching pace of 2007 -- when net profit nearly tripled -- because of mounting raw material costs, a May earthquake and severe winter snowstorms.
Its first-half was also inflated by a pure accounting profit of 254 million yuan, derived from changes in the fair value of convertible bonds. http://www.hkexnews.hk/listedco/listconews/sehk/20080909/LTN20080909537.pdf
Still, Coca-Cola, looking to make inroads into a pure-juice segment of the market it is absent in and shoring up its lead in the overall domestic beverages industry, is paying three times the market price for the Hong Kong-listed Chinese firm.
Huiyuan had 44 percent market share by sales value in China's pure juice sector and 42 percent of the nectars market in 2008's first half, based on AC Nielsen data cited by the company.
The company is expanding its production capacity to tap the fast-growing juice market in China. It will be able to make 2.9 million tonnes of juice products a year by the end of 2008, up from 2.56 million tonnes at the end of June.
Huiyuan shares eased 1.3 percent on Wednesday to HK$9.77, well below Coca-Cola's offer of HK$12.2 each. But they outperformed a 1.6 percent fall in the blue-chip Hang Seng Index and the index for Chinese firms listed in Hong Kong, which lost nearly 2 percent.
"The partnership with Coca-Cola will further develop the Huiyuan brand in a competitive global beverage market and provide a larger and more competitive platform for Huiyuan's business and employees," Huiyuan Chairman Zhu Xinli said in a statement late on Tuesday.