The Chinese government decided to tweak the US:
Yesterday the Ministry of Commerce rejected Coca-Cola’s $2.4 billion, all-cash bid to acquire Huiyuan, China’s largest juice maker.
We are obviously not the paragons of free trade and global movement of capital we claim to be – just ask anyone who has tried to invest in our media or transportation sectors, or for that matter, Unocal. China is protecting a business that already was owned by foreigners, and where the local shareholders were getting the mother of all squeeze-out premiums:
Coke had already signed agreements to buy shares and options from Huiyuan’s owner (who controls 42% of shares), private-equity house Warburg Pincus (which has options equivalent to 7%) and Danone (which controls 23%). The rest, 35%, is publicly listed equity that would have given shareholders a premium of three times the value of the stock when the offer was made.
Beyond the math or the fairness to domestic investors – both of which obviously matter little to the boys in Beijing – you would think that a growing, acquisitive country would want to set a better example. For example, how is this going to play in Canberra:
Already a leading opposition politician, Barnaby Joyce, is pointing to the Coke-Huiyuan decision as an example of how to treat Chinese companies looking to shop in Australia’s resource sector.
The biggest of those bids is Chinalco’s $19.5 billion offer for a stake in Rio Tinto and some of its mining assets.
Penny wise, pound foolish.
