Coca-Cola To Buy China Huiyuan Juice In Mega Deal

The US beverage giant is paying HK$17.9 billion (US$2.5 billion) to take over the Chinese juice maker, which has a market-leading position in an attractive niche and a growth rate that puts Coke’s own to shame. But Coke is paying richly for the privilege.

Measured by the usual standards, the deal suggests Coke needs to lay off the caffeine. Coke is paying a multiple of six times Huiyuan’s 2007 revenues, a big premium over Coke’s four. The price is equivalent to almost 50 times Huiyuan’s expected earnings this year, and almost a 200% premium to the juice maker’s share price on Friday.

This being China, though, such numbers don’t tell the full story. China’s increasing affluence and taste for premium products favour Huiyuan, whose sales are growing at close to a 30% clip. Astonishingly, it expects that pace to speed up to almost a 40% rate over the next five years.

That may not be mere bravado. Chinese consumers glug a fortieth of the volume of fruit juice their European and US counterparts put away. As they get richer, they are likely to drink much more of this premium product.

Wal-Mart picks Hong Kong for Asia Regional Office

World superstore giant Wal-Mart Stores Inc announced here yesterday the establishment of its new Asia regional headquarters in Hong Kong.

The new Wal-Mart office in Hong Kong will oversee the company’s operations in the Chinese mainland, India and Japan, as well as identify new business opportunities for the company throughout Asia.

Over the years, Hong Kong has been the most popular location in Asia for companies from around the world to establish a regional hub. Some 3,900 overseas and Chinese mainland companies operate regional headquarters or regional offices in Hong Kong, according to InvestHK.

Source: Business Times