SHARES of food and beverage producer Tingyi (Cayman Islands) Holding Corp yesterday surged nearly 10 percent after it unveiled plans to grow its business by forming a strategic partnership with PepsiCo Inc.

Tingyi's shares closed at HK$22.80 (US$2.9), the highest since October 31, after advancing as much as 14 percent, the biggest intraday gain since October 6, to HK$23.8. Hong Kong's Hang Seng Index yesterday shed 0.8 percent yesterday.

Tingyi, owned by Taiwan billionaire Wei Ing-chou, said last Friday that its beverage subsidiary Tingyi-Asahi Beverages Holdings Co (TAB) will buy PepsiCo's bottling business in China. In return, PepsiCo will receive 5 percent of Tingyi-Asahi, with an option to increase the stake to 20 percent by October 2015.

"The deal will strengthen Tingyi's competitiveness in the non-alcohol beverage market with a broader product mix and access to PepsiCo's global beverage innovation pipeline," said Zheng Zhenxi, an analyst at ICBC International.

"The long-term synergy will help Tingyi to form a stronger business platform and compete with larger rival Coca Cola," he said.

"But the biggest challenge remains whether it could turn around PepsiCo's money-losing bottling business and better coordinate resources," he said.

Under the deal, TAB will partner PepsiCo's current bottlers to produce, sell and distribute PepsiCo's carbonated soft drink and Gatorade brands.

It also will begin co-branding its juice products under the Tropicana name through licensing from PepsiCo.