China Huiyuan & Coca-Cola Eye Partnership: Report

Shares in China Huiyuan Juice jumped as much as 24 percent to a five-week high on Friday as news that Coca-Cola was in informal talks with the company fuelled renewed hopes for a possible tie-up between the firms.

Shares of Huiyuan, China's top juice maker, hit a high of HK$6.3 before retreating slightly to HK$6.03 at 0234 GMT, up 19 percent.

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The two companies were in talks to weigh partnership options after China blocked Coca-Cola's $2.4 billion takeover of the company last month, a source familiar with the situation told Reuters on Thursday.

"After months of due diligence, we would think coke knows everything there is to know about Huiyuan," said Renee Tai, analyst with CIMB-GK Research.

"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," she said.

In March, China rejected Coca-Cola's planned acquisition of top juice maker Huiyuan, saying the deal would have been bad for competition.

But Huiyuan had said it still had high hopes of finding a strong partner after Beijing rejected the deal, saying the combined concentration of the two companies would have hurt competition in the juice business.

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"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.

Groupe Danone owns more than a fifth of the company.

Huiyuan shares dived more than 62 percent to a low of HK$3.88 last month after the deal collapsed.

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