Coca-Cola’s US$2.5 billion offer to buy fruit juice company Huiyuan is touted as the biggest takeover transaction by a foreign company in China. However market restrictions remain a key issue in the case, according to Kirstie Nicholson, of counsel at Lovells Shanghai.
Although Huiyuan has a significant market share in the pure juice market, it has been reported that the company’s share is considerably lower in China’s overall juice market. Therefore defining Huiyuan’s market position is the issue. Nicholson said that parties are likely to advocate a wide market definition, while those who oppose the case will go for a narrow definition.
“The Ministry of Commerce (MOFCOM) will need to carry out an investigation and makes its own conclusions based on the available evidence,” she said.
Nicholson added that Article 7 of the Anti-Monopoly Law contains ambiguities as it fails to define clearly what companies can be granted exemption except for the state-owned enterprises.
“It will be very interesting to see to what extent Mofcom will use the provisions in the AML in its investigation and analysis of the proposed transaction,” she said.
If successful, Coca-Cola’s offer will be the largest of the cases to be reviewed by Mofcom under the merger filing provisions in the Anti-Monopoly Law.