After over four months of waiting, the Ministry of Commerce of China finally approved the strategic alliance between Master Kong and Pepsi.
Master Kong and Pepsi reached a strategic alliance agreement in November 2011, stating that Master Kong will exchange a 5% of its stake for the entire stake of PepsiCo's bottling plant in China. Meanwhile, Master Kong will become the franchised bottling provider for PepsiCo in China, operating the manufacturing, sales and distribution of PepsiCo's sodas and the sports drink Gatorade in the marketplace.
In addition to the 5% stake in Master Kong, PepsiCo will have the right to decide if or not to increase its indirect stake in Master Kong to 20% before 2015.
The transaction was then submitted to the Ministry of Commerce of China for approval and Master Kong has confirmed that it has recently received the letter of approval from the ministry. The company said that it has begun the acquisition process, but did not disclose when the deal can be completed.
Wei Ying-chou, chairman of Master Kong's parent company Ting Hsin International Group, previously said that the acquisition will make their drinks product line more complete and boost the group's sales for 2012. Master Kong's sales reportedly reached a record high of USD7.867 billion in 2011; however, its gross profit margin decreased by 1.89% due to the increase of raw material costs.