Coca-Cola Co. will have to submit its bid to buy a Chinese juice producer for review under China's new anti-monopoly law, state television reported, setting up the first major test of the legislation.
Coca-Cola's US$2.4 billion offer last week for China Huiyuan Juice Group Ltd already has stirred domestic opposition. Comments posted on Chinese Websites criticized the sale as the loss of a leading company to foreign owners.
The Anti-Monopoly Law, which took effect on August 1, was welcomed by foreign business groups as a step toward clarifying commercial conditions in China. But the government has released no details of what companies must do to comply.
Regulators have yet to receive Coca-Cola's application for approval to buy Huiyuan, state television said on its Website in a report dated Sunday.
"This acquisition is a very big one. So when we receive the application, we will inspect it carefully under the Anti-Monopoly Law," Commerce Ministry spokesman Yao Shenhong was quoted as saying.
The ministry did not respond yesterday to questions by phone and fax about the status of the proposed purchase. Coca-Cola did not immediately respond to a request for comment.
China is the world's leading destination for foreign investment. But the purchase of established companies is still rare and sensitive.
In July, United States investment fund Carlyle Group ended a three-year effort to buy a stake in a Chinese maker of construction equipment following regulatory resistance and public opposition.
China stepped up scrutiny of foreign acquisitions of domestic assets following Carlyle's bid for Xugong Group.
The government enacted a rule last year requiring a national security review for foreign acquisitions in some industries, though there was no indication Coca-Cola might face that hurdle.
Taking over Huiyuan would give Coca-Cola a leading position in China's competitive beverage market.
Huiyuan is the top Chinese maker of fruit juices and analysts estimate it has about 42 percent of the market.
Mergers must undergo an anti-monopoly review if the company created by the deal would have revenues of 400 million yuan (US$58 million) in China or 10 billion yuan worldwide, according to a government notice on August 3.
The law says mergers will be blocked if they hurt competition but gives no indication of what level of market dominance is deemed unacceptable.
Regulators have 30 days to decide after getting a formal application for a merger. But they also can conduct further reviews that can extend the deadline by up to 150 days.
Coca-Cola's offer for Huiyuan comes at a time when global firms are eager to expand into China, where consumer spending is growing at over 20 percent annually.
Huiyuan has said it secured commitments by three large shareholders accounting for 66 percent of its shares to accept the Coca-Cola takeover.
(Shanghai Daily September 9, 2008)