While the French finance ministry left open the option for further negotiations, a Coca-Cola spokesman said the company is not sure if it will pursue the deal to buy the unit from France's drinks company Pernod-Ricard.

"We are disappointed with the government's initial decision," Coca-Cola said. "However, the government has indicated that there is an open door for further consideration for undertakings. We will continue to evaluate our options."

Coke's December announcement that it was planning the acquisition sparked a hostile response from Orangina workers fearing for their jobs as well as a challenge from rival soft drink company PepsiCo Inc. Orangina distributes Pepsi products to hotels, cafes and restaurants in France.

Pepsi argued that the acquisition would give Coke anear-monopoly in the French alcohol-free sparkling drinks market.

"We're obviously very pleased with the government's decision," said Brad Shaw, a spokesman for Pespi-Cola Co, PepsiCo's Summers, N.Y.-based soft drink unit.

Analysts meanwhile said the French government's decision would bruise Coke's ego more than its bottomline.

Caroline Levy, an analyst with Schroder & Co in New York, said the loss of the deal would be irrelevant to Coke's bottomline in the short term.

"Psychologically, it's a loss of faith," Levy said. "I haven't seen Coke lose a major deal in recent years."

The deal with Pernod-Ricard also called for Coke to acquire four bottling and concentrate plants in France.

Levy said the decision was more of a negative for Coca-Cola Enterprises Inc, Coke's French bottler.

"It would have been a nice upside to the CCE story," she said.