BEIJING – China rejected Coca-Cola Co.'s $2.5 billion bid to buy a major Chinese fruit juice maker Wednesday in a closely watched case that stirred nationalist opposition to the sale of a successful homegrown brand to foreigners.
The proposed purchase of Huiyuan Juice Group Ltd. was rejected on anti-monopoly grounds, the Commerce Ministry said on its Web site. It would have been the biggest foreign acquisition of a Chinese company to date.
A Coca-Cola spokesman in Hong Kong had no immediate comment. Phone calls to Huiyuan were not answered.
Huiyuan's founders and major shareholders had endorsed the sale as a way for the company to improve product development and marketing.
Coca-Cola's offer for Huiyuan, announced Sept. 3, ignited an outcry by nationalists who objected to the foreign takeover of a major Chinese brand. Rival juice producers complained it would give Coca-Cola too dominant a position in China's beverage market.
Huiyuan has 42 percent of China's pure juice market and its green cartons of orange, apple, pear and grape juice are in supermarkets throughout the country. Acquiring it would have expanded Coca-Cola's presence in China.
Communist leaders routinely defy public opinion in their decisions but they might have shared the public's distaste for the sale because it collided with their goal of building major Chinese companies to dominate domestic industries.
The global economic downturn, which deepened after the Huiyuan bid was announced, might have hardened government opposition. Beijing's strategy for coping with the slump includes trying to create strong Chinese brands that can compete more effectively after global demand recovers.
Unlike major Chinese banks, oil producers and phone companies, which were created by government decree, Huiyuan is part of a pioneering group that has succeeded by supplying products customers want to buy.
The rejection came despite Coca-Cola's announcement this month that it would invest $2 billion in China over the next three years. Some observers took that as a gesture of Coke's commitment to China to build support for approval of the Huiyuan takeover.
China is one of the world's top destinations for foreign investment but the purchase of existing companies is still unusual and politically sensitive. After Atlanta-based Coca-Cola announced its bid, comments posted on Chinese Web sites called its founder, Zhu Xinli, a traitor. Huiyuan defended the deal as being in the best interests of the Chinese economy.
The Huiyuan bid was the first proposed corporate acquisition rejected on anti-monopoly grounds since a new Chinese law on the issue took effect last August, the government's China News Service reported.
The Commerce Ministry said it has investigated 29 proposed acquisitions under the anti-monopoly law since August and has approved 24. It did not give the status of the others.
Foreign business groups welcomed the anti-monopoly law as a step toward creating clearer business conditions. It forbids mergers that hurt competition but leaves regulators wide discretion in deciding how to determine that.
Earlier Wednesday, trading in Huiyuan shares was suspended in Hong Kong after their price fell nearly 20 percent on speculation Coca-Cola might abandon the bid.
Beijing issued rules in 2006 that bar foreign ownership of companies in power generation, weapons and other industries, but fruit juice makers are not mentioned.
China's own companies are stepping up acquisitions abroad. Its biggest aluminum producer, Aluminum Corp. of China, or Chinalco, struck a deal last month to invest $19.5 billion in Rio Tinto Group, an Anglo-Australian mining company.
Yet communist leaders' attitude toward the outsiders who have helped to finance China's economic boom is fraught with tension and conflict.
The public has often savaged Beijing as being inept in dealing with foreign capitalists. The government and its banks were criticized for buying bonds from Fannie Mae and Freddie Mac before the U.S. mortgage lenders ran into trouble and for taking a pre-IPO stake in investment group Blackstone LP, which later declined in value.
Last year, U.S. investment firm Carlyle Group dropped an effort to buy control of Xugong Group, a maker of construction equipment. Regulators and Xugong's domestic rivals opposed the deal even though the Chinese company sought Carlyle's backing to expand.