China Huiyuan Juice Group has entered into an agreement with founder and chairman Zhu Xinli to acquire fruit planting and juice-concentrate-making business for HK$4.9bn ($631.17m).This transaction will enable the company to improve its revenues while creating a vertically integrated business model for the Huiyuan brand.
Currently the juice maker deals with downstream businesses including bottling and sales of Huiyuan-branded products. This acquisition will offer access to upstream assets from the parent company.
Under the agreement, the juice maker will use bank loans to repay HK$1.5bn ($193.21m) owed by its upstream businesses.
Xinli was quoted by scmp.com as saying that this acquisition is mainly aimed at merging the upstream assets.
"Chinese people are increasingly caring more about the health benefits of different food and drinks," Xinli added.
"Existing shareholders' ownership in Huiyuan will be diluted after the acquisition but they will be rewarded with an increase in the company's earnings."
The transaction is subject to independent shareholders' approval and is expected to be completed in the third quarter of 2013.
