Hong Kong, April 24 - Shares in China Huiyuan Juice jumped as much as 25 percent to a five-week high on Friday after news that Coca-Cola was in informal talks with the company fuelled hopes for new partnership options.
Coca-Cola and Huiyuan, China's top juice maker, have met in Beijing after China blocked Coca-Cola's $2.4 billion takeover of the company in March, a source familiar with the situation told Reuters.
The informal negotiations with Huiyuan could include taking a minority stake in the Chinese juice maker's assets, a Wall Street Journal report said on Thursday, citing unnamed sources.
Both Huiyuan and Coca-Cola declined to comment.
Huiyuan, which is seeing consumption slow in China as the financial crisis crimps spending, still stands to gain from a tie-up with the global soft drinks giant, analysts say.
"Coke has deep pockets, they have budgeted $2 billion for this market and Huiyuan can benefit from Coke's ability to spend heavily on marketing and advertising, its relatively superior distribution network and the way it can push out new products quickly," said Renee Tai, analyst with CIMB-GK Research.
Shares in Hong Kong-listed Huiyuan hit a high of HK$6.3 in Friday morning trade before slipping to HK$5.84 at midday, up 15.4 percent.
CHEAPER TO BUY IN NOW
Huiyuan's shares have lost nearly 50 percent of their value in the past three months, suffering from a hangover after the failed takeover bid and plummeting valuations, making a second possible deal much cheaper for Coke.
The all-cash $2.5 billion deal Coke proposed in September offered a hefty premium for the juice maker. The company agreed to pay HK$12.20 a share in cash -- 43 times Huiyuan's forecast 2008 earnings at the time.
Some Coke investors said they were not totally disappointed when the deal collapsed because of the price tag.
China rejected Coca-Cola's planned takeover bid saying the deal would have been bad for competition, in what was the biggest test yet of how Chinese officials would implement a tough anti-monopoly law enacted last year.
But now, minority stakes in assets may alleviate those fears and pave the way for future tie-ups. France's Groupe Danone SA (DANO.PA) already owns more than a fifth of Huiyuan.
Huiyuan controls more than a tenth of the Chinese fruit and vegetable juice market, which grew 15 percent last year to $2 billion. Coca-Cola has a 9.7 percent market share and dominates in diluted juices.
"Coke has different options, one of them would be taking over Danone's stake, but Huiyuan can't expect premium valuations anymore. It's unlikely to fetch the HK$12.2 per share it did last time around," said Tai.