Fears that the deal – which critics warn would mark  the loss of a local champion  to foreign control  – could be derailed under anti-monopoly regulations, have helped push down Huiyuan Juice Group’s shares 13 percent from its year high on September 3, struck after the purchase was announced.

“This will be the very first case  under China’s antitrust law, implemented on August 1,” Huiyuan’s Chief Financial Officer Francis Ng told a news  conference Wednesday.

“The offer price had been carefully considered by both the buyer and the sellers,” said Ng, when asked whether he thought the offer price was fair.

Coca-Cola’s Hong Kong-based spokesman Kenth Kaerhoeg said: “We will obviously comply with the process, and we’ll facilitate it based on what the regulators ask of us.”

“It would be inappropriate to comment  on the regulatory process,” he added.

The European Union Chamber of Commerce in China  said on Tuesday that rising economic nationalism was deterring investment by European companies and hampering access  to the domestic market, saying the Huiyuan deal would be a litmus test of Beijing’s attitude toward foreign business.

Coca-Cola, looking to make inroads into a pure-juice segment of the market it is absent in and shoring up its lead in the overall domestic beverages industry, is paying three times the market price for the Hong Kong-listed Chinese firm.

Some industry experts  argue Beijing has no interest in killing a non-sensitive deal but others say a public outcry will have regulators scurrying to protect a beloved national brand.

Chen Yuan, a lawyer at legal firm Linklaters, argued the high-profile acquisition may tweak nationalistic sensibilities but the government  is unlikely to veto the deal without good reason, partly because the world  is watching.

How now?

Ng said Coca-Cola was preparing to submit an application  to China’s Ministry  of Commerce. Huiyuan will cooperate fully in the process, he added, but declined comment  on how long it might take the ministry  to make a ruling.

Donald Straszheim, vice chairman of Roth Capital Partners, was skeptical the deal would be allowed, noting a regulation protecting “famous brands” from foreign acquisition.

Some analysts however said China  had a lot to gain from the deal.

“We believe Beijing will not stand in the way of the takeover even if it may make a point of delaying the approval process. China  has more to gain from continued investment by the global US conglomerate...than from a pointless exercise of refusing Coca-Cola’s proposal to acquire a juice company,” CIMB-GK analyst Renee Tai wrote last week.

“With the uncertainties posed by a new US administration  next year, Beijing will want to save its firepower.”

Huiyuan posted a 7.2 percent rise in first-half net  profit to 367.3 million yuan ($53.71 million), lagging the scorching pace of 2007 – when profit nearly tripled – because of mounting raw material costs, a May earthquake and severe winter snowstorms.

Huiyuan shares ended 1.5 percent lower on Wednesday at HK$9.75 but outperformed the broader market. The stock is however trading well below Coca-Cola’s offer of HK$12.20 each.

Huiyuan’s first-half profit was inflated by an accounting profit of 254 million yuan ($37.1 million), derived from changes in the fair value of convertible bonds. Coke has 15.5 percent of China’s soft-drinks market, crowded with players including Tingyi, Uni-president and arch-foe PepsiCo Inc., and has little business  in the pure juice market, where Huiyuan controls a 44 percent share.

The Chinese firm is expanding its capacity to tap the fast-growing juice market. It will be able to make 2.9 million tons of juice products a year by the end of 2008, up from 2.56 million tons at the end of June.

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