Report: Blackstone, Carlyle and TPG eye Hui Yuan minority stake

Several private equity firms are reportedly looking to take a minority stake in the Warburg Pincus-backed Chinese beverage company, which recently had a buyout by Coca-Cola scuppered by anti-monopoly issues.

The Blackstone Group, The Carlyle Group and TPG are among several private equity firms looking at taking a minority stake in China’s Hui Yuan Juice, sources told South China Morning Post.

Listed on the Hong Kong stock exchange, Hui Yuan, which is partially-backed by Warburg Pincus, produces and markets fruit, vegetable and juice drinks. It is one of China’s largest beverage companies.

In March, China’s commerce ministry blocked beverage giant Coca-Cola’s bid to acquire Hui Yuan, citing anti-monopoly issues. As a result, Coca-Cola pulled out of the $2.4 billion deal, which if completed, would have been the largest acquisition made by a foreign investor in the country.

The commerce ministry's decision to block the deal underscored the discretionary element to any decision that “goes beyond the black letter of the regulations” in China’s anti-monopoly law, Henry Wang, a Beijing-based manager partner at law firm Dechert, said in an interview with sister publication PEI Asia.

A factor that antitrust regulators might have considered was the desire to keep premier local brands in local hands. Foreign private equity firms looking to invest in China should not treat antitrust issues as a procedural formality, especially if the target company holds nationally iconic brands, Wang said. The firms would be better advised to adopt a phased approach, in which “the target is acquired small pieces at a time”, he added.

Last year, Carlyle pulled out of a $375 million investment for an 85 percent stake in state-backed Xugong Group Construction Machinery. The two parties had come to an agreement in October 2005. However, three years later, regulatory approvals were still not forthcoming.

Warburg Pincus, Blackstone and Hui Yuan did not respond to requests for comment by press time. Carlyle and TPG declined to comment.