China Culiangwang Beverages Holdings tumbled in Hong Kong after announcing plans to sell its main protein drinks business to Coca-Cola and to issue more shares to repay debts.
The stock, which resumed trading after it was halted since Thursday, fell 16 per cent to HK$0.76 at 1:36 p.m. after plunging as much as 33 per cent earlier. The benchmark Hang Seng Index declined 1.3 per cent.
“Coca-Cola is not buying the entire company, only the beverage business which makes the bulk of the profit,” said Renee Tai, a Hong Kong-based analyst from UOB-Kay Hian Holdings, in an interview. “They’ve basically lost the engine driver for their earnings.”
Coca-Cola said on Friday it will pay about $400 million for Xiamen Culiangwang Beverage Technology, marking the Atlanta-based company’s renewed push into China after another deal was blocked six years ago. China Culiangwang earned 71 per cent of its profit from branded beverages in the fiscal year to April 2014, and 20 per cent from fresh and processed foods.
China Culiangwang, whose name means “King of Grains” in Chinese, said it will focus on developing its multi-grain food and snack products such as pastry, biscuits and cereal.
The company also announced on Friday it will raise as much as HK$1.06 billion to pay down its debts through a rights issue priced at HK$0.20 per share, a 78 per cent discount to the stock’s closing price on 15 April. Coca-Cola closed down 0.7 per cent on Friday in New York.
Bloomberg News, edited by ESM
