Coca Cola's China deal faces new trouble

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BEIJING -- With a tide of economic nationalism rising, China is promising to review Coca-Cola Co.'s attempted $2.4-billion takeover of a Chinese juice manufacturer, casting a shadow over a deal that would be the biggest-ever foreign corporate acquisition in that country.There is mounting opposition to the takeover bid among the Chinese public, the Chinese media and domestic industry. Other attempted takeovers by foreign companies have been blocked or diluted in recent months, leaving the Coca-Cola bid as a litmus test of China's response to foreign acquisitions.Coca-Cola Co. is bidding to buy China Huiyuan Juice Group Ltd., a famed national brand that holds almost 14 per cent of China's market for fruit and vegetable drinks. It has offered three times the market price. If it wins the bid, Coca-Cola would emerge as the industry leader in China with almost 18 per cent of the beverage market, according to estimates in the state media.The Chinese Commerce Ministry has now confirmed that it will review the takeover bid to ensure that it does not violate China's new antitrust law, which took effect last month."Once we receive the application, we will start the antitrust review," a ministry spokesman told China's state news agency.Coca-Cola will "comply with the process," a Hong Kong-based spokesman for the company told Reuters. He declined to comment further.So far the government is giving no hint of its views. But the state-owned news agency, Xinhua, said on Wednesday the prospects for approval are "unclear" with "much speculation emerging." It also said Chinese public opinion has "gone against" the bid.China's domestic juice producers are planning to write to the Commerce Ministry to oppose the takeover bid, on the grounds that it would threaten their survival by giving almost half of the juice sales to Coca-Cola. They are calling for Huiyuan's brands and assets to be sold at an auction in which its domestic competitors can participate.In the Chinese media, much of the commentary on the takeover bid has been negative. Many reports portrayed Coca-Cola as guzzling up a cherished national brand. "Coca-Cola drinks Huiyuan Juice," was a common headline.More than 300,000 people have expressed opposition to the takeover bid in online surveys, according to a report this week on Eastday, a popular Shanghai website."Many people on the Internet are saying that they won't accept their favorite domestic juice becoming a foreign product," an article said yesterday. "Some are even saying that they will never drink Huiyuan again if Coca-Cola is successful in taking it over."Global Times, a popular national tabloid, whipped up feeling against the takeover bid by recalling how Western countries had fought to protect their own brands from Chinese copying. "They are following the strategy of 'Don't touch mine, but I will take yours,' " the newspaper said in a commentary this week. "If we give up our local brands, as they require, and donate our technology to them according to their rules, we will be manipulated by them."Foreign investors are worried a nationalist backlash is endangering the climate for acquisitions in China. "Economic nationalism is rising and that's a concern for us," Joerg Wuttke, president of the European Chamber of Commerce in China, said at a press conference this week.Several attempted takeovers by foreign companies have been blocked or weakened in China recently. Carlyle Group, the U.S. private equity firm, was stalled in its protracted efforts to buy a majority stake in Xugong Group, one of China's biggest manufacturers of construction machinery, and finally abandoned the bid this summer.ArcelorMittal, the world's top steel maker, has been forced to pull back from its plans to acquire a majority stake in China Oriental Group Co. Ltd. Chinese regulators have delayed their response, and analysts say the bid is unlikely to succeed.(Distributed by Scripps Howard News Service, www.scrippsnews.com.)