Brewery plans 21% stake sale

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Last updated at: (Beijing Time) Friday, November 28, 2003

Brewery plans 21% stake sale

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China's Guangdong Brewery said yesterday it was in talks to sell a 21 per cent stake to one of the five largest international brewing groups, accelerating consolidation in the world's biggest beer market.

Market sources said potential buyers for the stake in the Hong Kong-listed company, a leading beer maker in one of China's richest provinces, include Dutch brewer Heineken, Denmark's Carlsburg and US-based Anheuser-Busch, the world's largest.

All three already have a presence in the fragmented but fast-growing Chinese market, along with world No 2 SABMiller and third-ranked Interbrew.

"China is a market where Heineken is keeping its eyes peeled for good opportunities, and we are looking for the right partner, one which shares our vision on beer products and the beer market," Heineken spokeswoman Manel Vrijenhoek said of the company's strategy.

But She would not comment on the Guangdong statement.

Guangdong Brewery Holdings has a market capitalization of US$314 million and does not rank among the top 10 Chinese beer makers, but it boasts a 16 per cent market share in its home province of Guangdong, where its flagship Kingway brand is popular.

"The M&A game is the trend in China's beer sector, but the competition is getting fierce," said Nomura International analyst Phoebe Wong.

"There are fewer breweries to pick from now. Most of the top five have foreign partners already."

Shares in Guangdong Brewery, which could not be reached for additional comment, climbed 4.4 per cent at HK$1.90 yesterday.

Guangdong Brewery said in a statement that it and its parent firm GDH had agreed with a company from "one of the world's top five international brewery groups by sales" to talk about various strategic investments.

It said talks with a potential investor were proceeding on the basis that the buyer would pay HK$1.85 per share in cash for a combination of existing shares and new shares worth 21 per cent of the enlarged issued share capital of the firm.

Anheuser-Busch this year doubled its stake in China's largest beermaker, Tsingtao Brewery, to 9.9 per cent and plans to increase that to 27 per cent in seven years as part of an expected further consolidation of the industry.

One industry source said Anheuser-Busch together with Tsingtao could be a potential buyer of Guangdong Brewery, partly because it is Tsingtao's chief competitor in the southern boomtown of Shenzhen.

Carlsberg, which declined to comment on the statement, said recently it planned to continue its buying spree in the country.

Heineken is present in China through Asia-Pacific Breweries, a joint venture with Singapore-listed Fraser & Neave.

It also exports directly to China.

SABMiller and Interbrew's management told ABN Amro that they are not in talks with Guangdong Brewery, said Fan Cheuk Wan, an ABN analyst.

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