China's knockout punch to Coke may floor Chinalco in Australia
20 March 2009
China's knockout to Coca Cola's acquisition of its largest juice company, Huiyuan Juice may floor Chinalco's chances of acquiring key assets and raising its stake in Rio Tinto in Australia. (See: Chinalco invests $19.5 billion in Rio Tinto to raise stake to 18 per cent)
Detractors of the Rio Tinto-Chinalco deal, ranging from shareholders, Australian political parties, arch rival BHP Billiton and commentators, received a boost after China rejected Coca Cola's $2.4-billion acquisition bid of Beijing-based Chinese juice maker Huiyuan Juice on Wednesday. (See: China trips Coke on Huiyuan Juice acquisition)
The decision by the Chinese anti-trust authorities rejecting Coca Cola's deal surprisedall those who were closely following the case as they thought that the Chinese government would clear the proposed takeover as it did not involve a strategic asset.
Rejecting the first big case under the antitrust law, subjected Beijing to criticisms of protectionism, especially for a company whose worth is only $2.5 billion and Coke had made a generous offer and later sweetened the deal by saying it would invest a further $2 billion in China. (See: Cola war heats up in China with Coca-Cola's new $2-billion investment plans)
On the same day that China rejected Coca Cola deal, the Australian Senate said it would examine whether foreign investment and proposals from state-owned entities to invest in Australian companies were in Australia's national interest after Senators opposed to the Chinalco deal, moved a motion for an inquiry.
The Senate recommendations will be forwarded to the Foreign Investment Review Board (FIRB) by 17 June, where it can opt to accept it and act on it or ignore it totally.
The FIRB in turn will send its own recommendations to Treasurer Wayne Swan, who will finally okay or reject the deal. FIRB said early this week that it has extended its review of the deal by 90 days and if necessary, may prolong it further by another 60 days.