Huiyuan’s share price falls sharply for the failure of Coke’s bid
Huiyuan’s shares dropped by HK$3.49 per share, or 42.05%, to close at HK$4.80 apiece. In early trading, the company’s shares dropped 53% at one point to the day’s lowest level of $3.88. After having been suspended since March 11, 2009, the stock continued trading on March 19, 2009.
The recent price fall was in a sharp contrast to its performance in the past several months after the announcement of the Coca-Cola bid. Huiyuan’s shared price had doubled since September in 2008 after the beverage giant of America offered a deal of HK$ 12.2 in cash for each of Huiyuan’s listed shares in Hong Kong.
On March 19, 2009, the Ministry of Commerce vetoed Coca-Cola’s bid to buy Huiyuan, the largest juice maker in China, saying the acquisition could help to create a too strong player, which has sufficient resources and marketing prowess to smash its rivals.
Qin Gang, spokesman of the Foreign Ministry, said in the regular briefing on March 19, 2009 that the ruling is different from trade and investment protectionism. Qin said China will adhere to the policy of opening up the markets open and welcoming foreign investment as usual, reiterating that China opposes trade and investment protectionism.
Analysts foretold that Huiyuan’s shared price will linger on around the current level, yet, as an independent company, Huiyuan will do well in the long run.
OSk, a research firm based in Hong Kong, said in a report that without the offer of Coca-Cola, they expected Huiyuan’s price to plunge, downgrading Huiyuan to sell with a target price of HK$4.
Liu Ziyuan, an analyst from BOCOM International, predicted that Huiyuan shares will fall back to the level before the takeover program was announced. Wang Xiaodi, an analyst from Merchant Securities, said that in the short term, Huiyuan has lost the good chance of obtaining the advanced management technique and marketing expertise from foreign investors.
But according to Liu, the failure of Coca-Cola’s bid would not affect much on the Huiyuan’s current business. Liu said that the juice market has not changed since the takeover program was announced in 2008, and that no rival in the domestic market could ever put Huiyuan’s place in danger at present.
With more than 45% of the pure juice market in China, Huiyuan is the country’s largest juice beverage maker, controlling over 10% of Chinese fruit and vegetable juice market that grew 15% in 2008 to $2 billion.
Liu said at present it is more important to see if Huiyuan’s management team has an alternative plan now that the deal has failed.
Zhu Xinlin, who established Huiyuan in Guangdong province in 1992, now holds more than 30% of its shares listed in Hong Kong. After the takeover plan was revealed in 2008, Zhu said that he would appreciate the Chinese government even if the deal is denied. He was quoted as saying, “If the deal is denied, I would assume the government has its own concerns.”
Huiyuan said on March 19, 2009 that it respects the decision made by the Ministry of Commerce and the company’s business will go on as usual.
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