Instant Noodle Maker Set to Acquire Pepsi China

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Since first announcing its intensions to acquire Pepsi China in late 2011, China's Tingyi (Cayman Islands) Holding Corporation, which uses the brand name Kang-shifu (Master Kong), is set to complete its bid shortly, the Securities Daily reports.

The acquisition is to be approved by China's Ministry of Commerce and an official announcement is expected soon.

Based in north China's municipality of Tianjin, Kang-shifu is the largest instant noodle and beverage producer in China, with a market share of 14.4 per cent; the second largest on the Chinese mainland. After taking over Pepsi China's operations including 24 bottling plants, the company will have a combined market share of 19.9 per cent.

Zhou Siran, an analyst from China Investment Consultancy, thinks the transaction poses a considerable threat to other beverage producers within the market.

"The alliance will cause the beverage market to restructure... It will put pressure on Coca-Cola and threaten its dominance, as the alliance will take up the niche market left unaccounted for by Coca-Cola," Zhou says.

Wei Yingjiao, executive director of Kang-shifu, sees the merger as an opportunity to increase the gap between themselves and Coca-Cola in terms of Chinese market performance. Currently, Kang-shifu's revenue is 1.2 times that of Coca-Cola China, and Wei expects the revenue to grow to 1.7 times that of their main rival following the merger.

Pepsi China will hand its bottling assets over to Kang-shifu and take up a 5 percent stake within the company.

Pepsi will maintain its brand name, with Kang-shifu handling the manufacturing, sales and distribution operations.

Coca-Cola has refused to comment on the changes likely to happen as a result of the merger.


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