Under the latest agreement, Danone is selling its 22.98 per cent share in Huiyuan to Hong Kong-based private equity firm SAIF Partners for HK$ 6.00 per share. The sale of the shareholding adds up to about €200m, according to Danone.
This is substantially less than what Danone would have received had Coca-Cola succeeded in its €2.4bn (HK$ 12.2 per share) bid for Huiyuan last year. The Chinese commerce ministry, the MOC, refused the Coca-Cola bid in March last year, citing antitrust concerns.
Euromonitor analyst Hope Lee told BeverageDaily.com that the collapse of the Coca-Cola deal had been a surprise. Lee suggested that political issues such as the wave of nationalism surrounding the Beijing Olympics may have played a role in the decision to prevent the foreign company from taking control of Huiyuan.
Since then, Lee said Huiyuan has struggled in the face of tough competition from the likes of Coca-Cola, whose Minute Maid brand enjoys a price advantage and extensive distribution network.
Danone said the decision to now sell its minority stake in the company to SAIF Partners is in line with its market strategy of focusing its activities in the Waters division on natural mineral and spring water drinks.
Lee said this makes sense as Danone has never been very strong in juice. The analyst said that Danone has done little with its stake in Huiyuan, treating it more as an equity investment than as a vehicle to expand the juice category in China.
Despite the sale, the French-based company said it remains committed to the Chinese market and would continue to pursue growth opportunities there in its four core categories: fresh dairy products, waters, baby nutrition and medical nutrition. Danone currently operates 20 factories and employs 9,000 people in China.