Coca-Cola Co.’s multibillion-dollar pact to acquire China Huiyuan Juice Group Ltd. may hold significance beyond its potential for expanding Coke’s reach in the world’s biggest nation. 
It could also be the first-ever acquisition of a Chinese company by a foreign entity to be reviewed pursuant to China’s anti-monopoly law that went into effect in August 2008, according to Paul, Hastings, Janofsky & Walker corporate partner Maurice Hoo in Hong Kong.
The novelty of the deal notwithstanding, Hoo and Morris, Manning & Martin partner Tim Xia in Atlanta both said they expect Coca-Cola to receive approval for the deal from Chinese antitrust regulators.
Coca-Cola announced on Wednesday that it would pay $2.4 billion to buy the maker of Huiyuan brand juice. Two sources offered differing opinions on the extent to which the would expand Coca-Cola’s market share. Bloomberg News said, citing Euromonitor, said Coca-Cola’s share of the Chinese fruit and vegetable juice market from about 10 percent to about 20 percent. But Merrill Lynch research analyst Christine Lee said Coca-Cola’s share of the Chinese juice market would grow from 28 percent to 37 percent.
No matter the size of Coca-Cola’s market share, officials with the Ministry of Commerce of the People’s Republic of China want to level the playing field between Chinese and foreign companies in the M&A market, Hoo said.
“I think the government is aware of the importance of fostering competition in a market economy, even if it is one built on socialist principles,” Hoo said.
Hoo also said that because the new law leaves many terms undefined, and because the same officials work for the Ministry now who worked there before the new law was passed, Hoo doesn’t expect a major shift in how the Ministry approaches deal reviews.
“We do not believe the new law will materially increase or decrease the likelihood of approval of the Coca-Cola deal,” Hoo said.
Additionally, Coca-Cola has built up a tremendous amount of goodwill in China, Xia said. That comes from doing business in the country for about 30 years, to taking an extremely high-profile sponsorship role during the Beijing Olympics.
“When you entered [the Beijing Olympic Green Olympic Park], what your eyes would see first is the big Coke bottle,” said Xia, who attended the Beijing games.
Two other important considerations, according to Xia, are that Coca-Cola plans to retain Huiyuan Chairman Zhu Xinli as honorary chairman, and allow some members of Huiyuan management to remain on board.
“Coke is not going to just step in and buy the company,” Xia said. “They’ve said they’re going to utilize Huiyuan’s trademark and marketing and the influence they already have. That will make Chinese people feel good about the deal.”
It’s not unheard of for a U.S. company to engage in M&A activity in China. Most recently, Bank of America in May paid $1.9 billion to acquire a 2.75% stake in China Construction Bank.