Thursday, September 04, 2008

Coke's takeover of Huiyan - Complications?

Consider this an extra for my loyal readers.

Coke announced a $12.2 a share takeover offer for Huiyan Juice. 190% premium over previous close. PE ratio of 46.6 on historical earnings. And the good folks over at Money Cafe blog wrote an excellent entry on this.

The more I think about the analysis by the good folks over at the money cafe blog, about the takeover attempt of Huiyan Juice 匯源 by Coca Cola, the more I am troubled.

The market share of Huiyan 匯源 42%, is already way into dominance territory.

Adding to it Coke's share, resulting in 52%. This is safely into Anti-competition commission's level of interest.

Of course, when I was back in school. I remember studying the anti trust case of Coke taking over of Dr Pepper (the third rank soft drink company in the US then behind Coke and Pepsi), and Coke in order to throw off anti trust issues, defined Coke's market as anything that one drink's but Milk and Beer.

Anyhow, with the new Anti Trust law in China, which the Lion Rock Institute has long believed will be used as a tool to protect national champion/dominant local player, Huiyan will be a good test to see how active this law is in China.

If silence, this will be a test case that everyone will cite for future acquisition in China, if China had a common law system. Alas.

But if this law is used to block this takeover... See ALL HELL break loose. After all, If it was so easy to buy such a firm, Danone wouldn't have to sue Wahaha hahaha


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