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Beijing Orient Agribusiness Consultant, Ltd. (BOABC), a leading company specializes in agribusiness consulting service to the food business in China, recently commented on the acquisition of China's beverage giant, Huiyuan Group by Coca Cola Group.

CocaCola announced its acquisition of Huiyuan Group, the largest pure fruit juice enterprise in China, in a 17.92 billion Hong Kong dollar deal on Sept. 3.

BOABC Chief Consultant, Mr. He Xuegong sees the acquisition as a ''natural selection of market development''. Looking at the deal from the perspective of future development potentials of the fruit and vegetable beverage industry and competitions among the undertakings, as well as the development strategies of Coca Cola Company, BOABC holds the view that the deal, valuing at 17.92 billion HKD, is good value for [the] money.

In response to oppositions in China that see the acquisition as a hostile move against a [Chinese] national brand, Mr. He Xuegong comments, ''Huiyuan is a brand made famous out of natural market development. It is not given by the government but the outcome of the market. It knows no national boundary. It belongs to all mankind. We should not perceive market issues from the political perspective. If someone insists that it is a national brand, then it is because of narrow-minded nationalism, which is both horrible and ugly. When the world economy is getting more and more integrated today, excessive stress of national concepts in the commercial field will lead to isolation from the rest of the world.''

With regard to Zhu Xinli, the founding father of Huiyuan being cursed as a traitor following the decision, BOABC holds a different viewpoint. As a farmer entrepreneur who developed a local enterprise in Shandong into a well-known brand of fast consumer goods throughout the country, Zhu's legendary success by hard work and overcoming challenges have been commonly acknowledged. When many domestic entrepreneurs choose to sell out their enterprises for participation in the capital market, he is well aware that capital operations generate much more returns than business operations. BOABC does not rule out the possibility that Zhu Xinli himself may turn to a career in the capital market.

BOABC also believes that Huiyuan is making the right move by seeing its own financial difficulties. ''When an enterprise wants to sell its brand and assets, it must have difficulties that it cannot possibly overcome by itself. For private enterprises in China, such difficulties often manifest as financial woes and the success or problem,'' comments Mr. He Xuegong. ''For Huiyuan, the successor problem does not exist. But we can see from the financial reports of Huiyuan in the past three consecutive years that it has some financial problem. Particularly in the first half of 2008, Huiyuan began to slash its staff in large numbers, which testified to their financial dilemma. For owners of the enterprise Huiyuan andits brand, the most correct and wise solution is to sell it to an enterprise that has complementary market strategy. International beverage giants come naturally as first choices, so Coca Cola's takeover of Huiyuan is a natural outcome.'' Huiyuan is a brand that has fought for its survival in the market.Further investment is necessary for the company to maintain and enhance the brand for its future survival, but for Huiyuan in its financial difficulties,the burden is too much. The ideal way out is the takeover by a more powerful company for sustained resource input so that the brand of Huiyuan can be maintained and enhanced.

In answering the ''monopoly'' allegation, BOABC argues that the acquisition will not create a monopoly. Huiyuan Group's sales volume in 2007 totaled just over 3billion RMB, whereas China's market for fruit and vegetable beverages is a market of close to 40 billion RMB. Huiyuan only accounts for less than 8 percent of China's market for fruit and vegetable beverages. Therefore, BOABC believes that Coca Cola's takeover of Huiyuan will not constitute a monopoly of China's market for fruit and vegetable beverages, let alone a threat to''national security''. ''To sum up, we believe that the government will follow the legal procedures for its review of the case and treat it as an ordinary market transaction, as it should be,'' comments Mr. He Xuegong.

Officials of the Anti-monopoly Bureau of the Ministry of Commerce and Li Xiaojun, Vice President of Coca Cola in China all confirmed that Coca Cola was yet to submit relevant applications to the Anti-monopoly Bureau of the Ministry of Commerce. According to Li Xiaojun, they are preparing relevant documents and data for application of the takeover.

The China Ministry of Commerce has said it will handle the case of Coca Cola's acquisition of Huiyuan in line with principles of the market economy, by ''adhering to principles of the market economy in its treatment, i.e. opposing monopoly of the market by supporting normal market activities.''

China's Anti-monopoly Law, effective as of Aug. 1, 2008, and supplementary Regulations on the Criteria for Collective Declaration by Undertakings by the State Council, when concentration of undertakings meets one of the following criteria, the anti-monopoly review will apply:

   -- Global business turnover totals over tenbillion RMB, and the turnover in China of the two partiesinvolved during the proceeding financial year totals over 400,000,000 RMB;

   -- The turnover in the proceeding financial year of all undertakings taking part in the concentration totals over two billion RMB, and the two parties involved have turnover in China totaling 400,000,000 RMB.

Beijing Orient Agribusiness Consultant, Ltd. (BOABC) is a leading company specialized in agribusiness consulting service to the food business chain which is founded by a group of the very best experienced agricultural experts in 1996. It is China's most professional firm in providing research reports and consulting services on agriculture and food area for clients from all over the world.

 Source: Xinhua/PRNewswire/ Beijing Orient Agribusiness Consultant Co., Ltd. 

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