Coca-Cola has offered to buy China Huiyuan Juice Group, for HK$17.9 billion ($2.75 billion) to become the biggest juice maker in the most populous nation.
 
The world's biggest soft-drinks maker will pay HK$12.20 a share in cash, triple the last closing price of HK$4.14, the companies said in statements today. Beijing-based Huiyuan's shares more than doubled to HK$11.06 in Hong Kong trading.
 
Coca-Cola Chief Executive Officer Muhtar Kent, two months into the job, is making the company's biggest overseas acquisition as sales slow in North America. The purchase will double Coca-Cola's share of the juice market in China, based on estimates by Euromonitor International.
 
"This will help Coca-Cola to increase market share in China significantly,'' Renee Tai, a food and drinks analyst at CIAM Group Ltd, in Hong Kong, said in a phone interview. "The drinks market is very competitive in China.''
 
The offer values Huiyuan at 46.6 times estimated earnings this year, according to data compiled by Bloomberg. Uni-President China Holdings Ltd., the Shanghai-based maker of fruit drinks and instant noodles, trades at 20.03 times estimated earnings.
 
Huiyuan shares had fallen 49% this year until Aug. 29, when the stock was halted pending today's announcement.
 
Asian growth
 
Coca-Cola's operating profit margin was 39% last year for the division that includes North Asia and the Middle East, compared with 22% for North America. Both units account for about a quarter of operating income.
 
Huiyuan is the biggest fruit and vegetable juice company in China by market share with 10.3%, followed Coca-Cola with 9.7%, by according to Euromonitor
 
The deal will help Coca-Cola make savings in raw materials such as packaging and fruit and allow expansion into ``other beverages,'' Kenth Kaerhoeg, spokesman for Coca-Cola Asia, said in a telephone interview. "The more packaging and fruit you buy, the bigger discount we'll get.''
 
Coca-Cola has been introducing still beverage drinks in China, including fruit and tea brands, as it seeks to boost sales in the world's fastest-growing major economy. The Atlanta-based company has operated in China since 1979.
 
Danone stake
 
Buying Huiyuan will "strengthen our business in China, especially since the juice segment is so dynamic and fast growing,'' Kent said in a statement on Business Wire.
 
Royal Bank of Scotland Group Plc is advising Coca-Cola on the deal while Goldman Sachs is Huiyuan's adviser.
 
Coca-Cola projects earnings to be reduced to 3 cents a share from 4 cents a share in the first year after the acquisition. The deal will boost earnings by the third year after the purchase, Coca-Cola said in its statement.
 
Under the deal, Coca-Cola will buy all the outstanding convertible bonds of the Chinese company, the Beijing-based company said, in a statement to Hong Kong's stock exchange today.
 
French company Groupe Danone SA is Huiyuan's second-largest shareholder with a 23% share, according to Bloomberg data.
 
Coca-Cola said it plans to keep the Huiyan brand.
 
Bloomberg