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Wahaha Staff Boycott Danone Takeover Attempt
    2007-04-15 14:50:57     Shanghai Daily

Employee delegates of China's biggest beverage maker have said they will boycott Groupe Danone's attempt to buy controlling stakes in all of the domestic company's subsidiaries that Danone doesn't already own.

The statement said Danone, which owns 51 percent of a joint venture with Hangzhou Wahaha, had insulted Wahaha's chairman Zong Qinghou and employees using the excuse of protecting shareholders' interests and it had tried to cover up its hostile acquisition using unreasonable excuses.

The statement claimed Danone had never contributed anything to Wahaha, such as technologies since 1996, when the world's largest yogurt maker established a joint venture with China's biggest beverage maker to produce drinking water, beverages, dairy products and Coke.

The Paris-based Danone invested 1.5 billion yuan (US$194 million) over 10 years while earning 3.8 billion yuan in profit, but the board directors from Danone always refused to increase employees' wages, the statement said.

Wahaha firmly opposed Danone's attempt to buy controlling stakes in Wahaha's other subsidiaries with a lump-sum figure of four billion yuan. These companies, solely owned by Wahaha, are producing competitive products with the Danone-Wahaha joint venture and using the Wahaha brand.

Danone's plan, if realized, would give the joint venture the exclusive right to produce, distribute and sell food and beverage products under the Wahaha brands.

Zong said in an interview on Sunday that Wahaha rejected the plan, fearing Danone would monopolize China's food and beverage industry.

"The price is undervalued and the contract is unfair with almost no obligations required for Danone," said Zong, "It's a vicious takeover and Chinese companies need to develop on our own."

Danone said it has prepared to take legal measures to protect all shareholders' interests in response to Zong's statement.

The company said Zong's opinion did not accord with the facts and his behavior was harming the interests of the joint venture, of Wahaha, the staff and Danone.

The contract the two sides signed in 1996 is fair and legal, Danone said. It was unfair if one side wanted changes by claiming it was compelled to sign the contract, the company said.

Danone said the contract stipulated that the joint venture of Danone and Wahaha has the exclusive right to produce, distribute and sell food and beverage products under the Wahaha brands.

Wahaha has urged the Chinese government to issue regulations against foreign companies' hostile acquisition to protect local brands, according to the statement.

Danone has acquired stakes from at least five dairy and drinks companies in China over the past 20 years, including Robust Group and Bright Dairy & Food Co.

Danone was blamed after Robust last year lost more than 100 million yuan, and Emmanuel Faber, Danone Asia's president, admitted the company's mistake in integration, an earlier report said.

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