"China's Anti-Monopoly Law: A Warning For Overseas Acquirers?"

Financier Worldwide - July 2009

SULLIVAN & CROMWELL LLP Partner Michael DeSombre was quoted in the Financier Worldwide article titled, "China's Anti-Monopoly Law: A Warning For Overseas Acquirers?" The article discussed China's Anti-Monopoly Law, effective August 2008, which controls foreign investments and mergers with Chinese companies, and hypothesizes that the recent rejection of the Coca-Cola/Huiyuan deal by the Chinese government may have been triggered by a similar rejection of China Offshore Oil Corporation's (CNOOC) acquisition of the U.S. oil company Unocal. "The main parallel between Coca-Cola's proposed acquisition of Huiyuan and CNOOC's failed bid for Unocal is that a foreign acquirer should always be mindful of domestic public opinion in any high-profile acquisition. Although 'national security review' is also contemplated under the Anti-Monopoly Law, 'national security' was not referred to as a factor in the Ministry of Commerce of the People's Republic of China's public notice relating to the Coca-Cola/Huiyuan case," Mr. DeSombre said. "We believe that the Chinese government is making an effort to channel foreign investments in a way that is consistent with the country's evolving industrial policies. It is promoting investments in sectors such as energy saving, environmental protection and infrastructure improvements that fall within the 'encouraged category' in the revised Industry Catalogue for the Guidance of Foreign Investments." DeSombre added, "Furthermore, there were recent indications from government officials that investment in environmentally friendly, hi-tech and new industries is being encouraged, rather than investment in sectors suffering from overcapacity or inefficiency."