China’s Ministry of Commerce rejected Coca-Cola’s US$2.4 billion bid for China’s juice maker Huiyuan yesterday which would have been the largest takeover in history of a Chinese company by an overseas competitor.
Officials from the Ministry of Commerce claim that the takeover would have been bad for competition and cited anti-monopolistic grounds as the reason for their rejection of the deal.
This move may have a negative effect on how companies perceive business investment in China given the friendly and seemingly fair offer proposed by Coca-Cola to Huiyuan.
“It indicates that the Ministry of Commerce is going to take a very hard look at foreign acquisitions of leading Chinese brands, even if the foreign acquirer has little or no market penetration in that particular segment of the market,” said Lester Ross of the Wilmer-Hale law firm in Beijing.
This move by China, however, is not without precedent. In 2005, America’s government strongly contested the attempted takeover of U.S. based oil company Unocal by China National Offshore Oil Company citing “national strategic interests” even though their bid of US$18.5 billion was the highest.