According to a report by Normandy Madden and Natalie Zmuda of Advertising Age, “China’s leaders are eager to see local companies invest in overseas assets, grow their businesses and improve the overall image of China. But the government isn’t ready to loosen control over its own assets. China’s Ministry of Commerce (MOC) today issued a long-awaited decision and nixed Coca-Cola Co.’s bid to buy about two-thirds of China Huiyuan Juice Group for $2.4 billion. The Hong Kong-listed company is the mainland’s largest producer of pure fruit juices.”
Huiyuan Juice Group
The official reason the deal was shot down by the Chinese government was to protect the competitiveness of local Chinese companies.
“The acquisition would have been the largest foreign takeover of a Chinese company. The deal was widely seen as a test of China’s willingness to let local firms fall under foreign control. China has been loathe to do that in the past and clearly hasn’t changed its mind, based on today’s ruling.”
Coca-Cola is quite bummed that the deal didn’t go through, as it has invested and plans to invest a sizable amount to butter up the Chinese government.
“Last week, the company opened a $90 million innovation and technology center in Shanghai, its largest research and development facility in Asia, partly to speed up development of new products to suit Chinese consumers’ tastes and preferences…Coke also plans to spend $2 billion on new plant and distribution infrastructure, sales and marketing, and R&D in China over the next three years, underscoring China’s importance as a major growth market.”