E-Malt.com News article: 2593

Hong Kong: SABMiller Plc, the world's second-largest beer maker, has ended its strategic partnership with Harbin Brewery Group Ltd but may mount a takeover bid for the firm, Reuters sited an industry source on May 4. London-based SABMiller and top global beer maker Anheuser-Busch Cos Inc appear headed for a battle for control of Harbin after the U.S. giant said on May 2 it had bought about 29 % of Harbin for HK$1.08 billion (US$138.5 million), or HK$3.70 per share. "AB's investment has set the scene for a takeover battle for Harbin Brewery," said ABN Amro analyst Fan Cheuk Wan

SABMiller Plc already holds a 29.4 % stake in Harbin, which it bought last year for HK$675 million, or HK$2.29 per share.

Harbin, one of the oldest brewers in China, dominates the northeast region and is the fourth-largest player in a Chinese beer industry that has seen a flood of investment from overseas giants in recent years. China's fast-consolidating beer industry is the world's largest by volume, and is growing by up to 8% a year as spending power rises in booming China. "The investment agreement was terminated on May 3," the source told Reuters, adding that SABMiller may choose to make a general offer for the shares in Harbin that it does not own. Officials at SABMiller and Anheuser Busch declined comment.

"It's going to be pretty chaotic. Anheuser Busch and SABMiller are major rivals. There is a lot of uncertainty ahead and Harbin Brewery may be worse off in the end," said Nomura analyst Phoebe Wong. Some analysts said Anheuser Busch's move to buy a Harbin stake was likely sparked by its intention to slow SABMiller's expansion plan in China's beer market, the world's largest by volume.

An official at Harbin, whose shares were suspended before the market opening on May 3, could not be reached for comment. "It looks like both sides will not give up their stakes in Harbin, and the two major competitors are unlikely to cooperate," said Phoebe Wong, analyst at Nomura. "Eventually, one has to pull out," she said.

Both SABMiller and Anheuser Busch already have separate China tie-ups. SABMiller holds a 49 % stake in China Resources Breweries, the country's second-largest. Anheuser-Busch holds 9.9 % of market leader Tsingtao Brewery, a stake that it plans to increase to 27 % over the next few years. Tsingtao Brewery is the leader in China's beer market with a 13 % market share. Meanwhile, Tsingtao has said it is supportive of Anheuser's investment in Harbin.


Harbin shares last traded at HK$3.225 and are up about 3% this year. The company went public in June 2002. Under Hong Kong rules, any party that increases its stake in a company to 30 percent or more is required to make a general offer for the shares it does not own.

Other recent foreign investors in the Chinese beer sector include Carlsberg Breweries, Heineken, and Scottish & Newcastle.


04 May, 2004