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Wahaha rejects Danone's new cooperation plan, says negotiation hard to go on
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08:32, March 10, 2008

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Chinese beverage giant Wahaha Group has rejected a new cooperation plan put forward by French food group Danone, saying the ongoing peace negotiation is hard to continue, Wahaha said on Sunday.

Danone proposed the two companies merge all their businesses toform a new company that will eventually be listed on the A-share market. Danone and Wahaha will each hold 40 percent of shares in the new company, leaving the remaining 20 percent as public shares.

Danone wants to ensure at least 50 billion yuan (6.9 billion U.S. dollars) in market value if its shares in the new company are lower than 40 percent, said Zong Qinghou, board chairman of the Hangzhou-based Wahaha Group.

"But those proposals and conditions are groundless, and we cannot possibly accept them," he said on the sidelines of the annual session of the National People's Congress (NPC), China's parliament.

Zong said an agreement must be reached through sincere consultation on equal footing.

The latest round of peace negotiation was originally scheduled to last two months since late December, but was prolonged by a month.

"I have no idea whether the talks will go on," he added.

Danone, which owns a 51-percent stake in the 39 Danone-Wahaha joint ventures, has accused Wahaha of setting up independent companies and selling products identical to those sold by the joint ventures. Danone had demanded a 51-percent stake in the non-joint venture companies, which Wahaha rejected.

Since May last year, the two companies have filed numerous complaints and lawsuits against each other under various Chinese and foreign jurisdictions.

Danone filed its first lawsuit against Wahaha on May 9 in Stockholm, and on June 4, Danone filed another lawsuit, in Los Angeles, against two Wahaha-related companies and two individuals.

Also in June, Wahaha filed a request with the arbitration commission in the eastern Chinese city of Hangzhou over a disputed trademark transfer.

It also lodged suits in Shenyang and Jilin against Danone executives Emmanuel Faber, who replaced Zong Qinghou as chief of Danone and Wahaha's 39 joint ventures, and Qin Peng, China director for Danone Asia and Francois Caquelin, a financial director, claiming they had breached company law or damaged the interests of the Danone-Wahaha joint venture.

ln July, Danone filed a counterclaim against Wahaha, alleging that Wahaha had failed to transfer trademarks to their joint venture under an agreement reached in 1996 when their cooperation started.

Danone and Wahaha negotiated for another round before French President Nicolas Sarkozy visited China late November last year. The talks, however, were fruitless.

Thanks to mediation efforts of China's Ministry of Commerce, Wahaha and Danone announced on Dec. 21 last year that they would end confrontation and return to peace negotiation.


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