Huiyuan Juice, China's leading fruit and vegetable juice producer, soared more than 160 percent on Coca-Cola's premium takeover cash offer.

The Coca-Cola Company, through its subsidiary Atlantic Industries, announced its intention to make a cash offer to purchase China Huiyuan Juice at HK$12.20 per share, a 195 percent premium over the closing price of HK$4.14 Friday. The stock was suspended Monday pending the announcement.

Shares in Huiyuan rose as much as 172.46 percent, hitting an intraday high of HK$11.28. The stock ended the day at HK$10.94, 164 percent higher.

According to Merrill Lynch, valuation at the acquisition implies a 45 times forecast 2008 earnings, higher than the China Consumer group average of 20 times price-to-earnings ratio.

However, Castor Pang, a strategist at Sun Hung Kai Financial, said that Coca-Cola's offer is quite reasonable. "Considering Huiyuan's being a unique brand in China, also its market share and potential, the offer is not too high."

Yantai North Andre Juice, which is engaged in the production and sales of apple juice concentrate, leapt 7.41 percent yesterday, stimulated by the surge in Huiyuan.

Mengniu, China's leading milk and dairy products maker, also jumped 2.22 percent. Food and beverage stocks such as Tingyi rose 0.86 percent and Uni-President China gained 2.82 percent, shrugging off the broad market sentiment.

Pang said the food and beverage stocks rose under speculation, and Huiyuan has already surged a lot, and "it's unlikely that the stock could rise above the offer price of HK$12.20."

The takeover bid from Coca-Cola is pending the government's approval, and the related stocks may retreat before that, Pang said.

Merrill Lynch changed its investment opinion on Huiyuan to "No Rating" from "Underperform" as the stock is no longer trading on fundamentals.

The brokerage is concerned about the uncertainties with government approval. "The likelihood and timing of which are both uncertain," it said in a research note yesterday. Huiyuan's takeover will become the nation's first takeover case of an industry leader by a foreign entity after the Anti-Monopoly Law was enacted in August 2007.

Merrill Lynch expects that Huiyuan together with Coca-Cola will be able to win over more market share in the juice and drink market, if the deal goes through. The combined entity will see close to 37 percent market share.

(HK Edition 09/04/2008 page3)