By staff reporter Wang Shanshan and intern reporter Liang Dongmei

In an effort to expand beyond carbonated drinks in China, the Coca-Cola Company said it plans to buy China’s best-known juice maker Huiyuan Juice Group (HKSE: 01886) for US$2.4 billion. If cleared by the Chinese government’s antitrust reviewers, the deal will be the biggest takeover by a foreign company in China.

Huiyuan Juice announced on September 3 that three of its shareholders have committed to sell to Coca-Cola, giving Coca-Cola a 66 percent stake of the company. Coke will offer HK$ 12.2 for each of Huiyuan’s Hong Kong listed shares. The deal would be the second largest transaction for Coca-Cola.

Li Xiaojun, vice president of Coca-Cola China, said, “Huiyuan is a successful brand in China’s juice market. The deal will contribute a great deal to our business development, especially the business of non-carbonated drinks. Moreover, Huiyuan’s equipment will help us improve operation.”

Qu Bing, the head of public affairs of the Huiyuan group, told Caijing that the deal with Coca Cola is a win-win situation.

The spokesperson for Huiyuan’s second largest shareholder, Danone, Ding Ying, said to Caijing that Coca-Cola’s offer shows the value of Huiyuan’s brand, and Danone has received sound returns since it partnered with Huiyuan in 2006. Danone agreed to sell its 21 percent of Huiyuan’s stake to Coke.

The market has reacted positively to the deal. Huiyuan’s shares reopened higher on September 3. Share price surged to HK$ 11.28 and closed at HK$ 10.94, rising 164 percent on that day. Trading volume reached HK$ 2.48 billion. The share closed at HK$ 4.14 before being suspended on September 1.

However, the ambitious deal still awaits approval by the Chinese authorities. According to Li Xiaojun, Coca-Cola has submitted materials to relevant departments for antitrust review.

China’s brand new Anti-monopoly Law took effect on August 1. One expert who helped draft it told Caijing that Coca-Cola’s deal has reached the requirement for an antitrust review. Approval hinges on its perceived impact on market competition.

According to market research firm ACNielsen, Huiyuan maintains a leading position in the 100-percent juices and nectars markets in Chinese mainland, with 42.6 percent and 39.6 percent market shares respectively. The company’s annual sales value exceeds 2.6 billion yuan. Meanwhile, Coca-Cola accounted for 9.7 percent in China’s juice market in 2007, said research firm Euromonitor.

Since the global carbonated drinks market is declining, Coca-Cola has been counting on non-carbonated drinks business to beat global rivals. Case in point: Coca-Cola last year grew 12 percent in non-carbonated drinks and just 4 percent in carbonated drinks across the world.

At the same time, China’s juice market has witnessed rapid growth in recent years. According to Euromonitor, the compound growth rate of the market reached 14.5 percent. And the annual sales volume is expected to top 19 billion liters by 2012.

After the current transaction is completed, Coca Cola will seek to purchase remaining stakes of Huiyuan for a complete buyout, according to Huiyuan’s statement.

Coca-Cola CEO and president Muhtar Kent said in a press release that after the takeover, Huiyuan’s brand and operation model will be retained, and Huiyuan’s current board chairman Zhu Xinli will be appointed chairman of the new company.