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Back in September, I wrote about the Coca Cola Co.'s (NYSE: KO) offer to acquire Beijing-based China Huiyuan Juice Group Ltd, China's number one 100% juice and nectar company for $2.4 billion.But almost immediately, there were questions about whether the deal would ever be consummated. Steve Mallas wrote that the acquisition would "be the first case presented under a new antitrust law put into effect by China a little over a month ago. Traders have sent shares of China Huiyuan Juice Group lower under speculation that the transaction is not a sure bet."
The skeptical arbitrageurs appear to have had their fears confirmed with Reuters reporting that the Chinese government has nixed the deal based on a belief that it would be bad for competition. China's Ministry of Commerce rejected Coke's efforts to assuage anti-competitive concerns as being insufficient.
For Coke shareholders, the effort to buy Huiyuan is probably a bad omen anyway. Sales of soft drinks have been in decline for a while, and are expected to continue as consumers shift toward more natural drinks that are perceived (correctly or not) to be healthier. The company is trying to decrease its exposure to its core businesses through acquisitions -- a strategy that has historically been unsuccessful for the vast majority of companies that have attempted it.
For Coke shareholders, the effort to buy Huiyuan is probably a bad omen anyway. Sales of soft drinks have been in decline for a while, and are expected to continue as consumers shift toward more natural drinks that are perceived (correctly or not) to be healthier. The company is trying to decrease its exposure to its core businesses through acquisitions -- a strategy that has historically been unsuccessful for the vast majority of companies that have attempted it.
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