E-Malt.com News article: 2812

China: Belgian brewing force Interbrew announced on 21 June 2004 that it had acquired a 70% controlling interest in Zhejiang Shiliang Brewery Company Ltd., located in the Yangtze Delta for a consideration of USD 53.2 million. This transaction strengthens Interbrew's number one position in Zhejiang Province where, pursuant to this transaction, the company will have a market share of close to 50%. The transaction is expected to close during the summer of 2004.

Interbrew currently has six breweries and one bottling center in Zhejiang Province, representing operations in Ningbo, Zhoushan, Wenzhou, Yandangshan, Pingyang, Jinhua and Yuyao. This Zhejiang Shiliang Brewery Company Ltd. transaction clearly solidifies Interbrew's number one position in this Chinese province with 47 million inhabitants. With a strong local brand, Red Shiliang, an excellent distribution network, a very experienced local management and a good geographic fit, Zhejiang Shiliang Brewery Company Ltd. will integrate very well with Interbrew's existing operations in Zhejiang province.

This transaction was completed at an EV/EBITDA multiple of 11.6. On an EPS before goodwill amortization basis the acquisition will make an accretive contribution to Interbrew's EPS from year one.

"With this acquisition Interbrew has reinforced its leading position in Zhejiang by adding over 2m hl sales volume to its current operations in the province." says Patrice Thys, President Interbrew Asia Pacific Zone. "Zhejiang, one of the wealthiest provinces in East China, is a key platform for advancing our strategy of being a leading player in China's beer industry."

Zhejiang Shiliang Brewery Company Ltd.'s General Manager, Mr. Qiu Jiangsheng says, "Zhejiang Shiliang Brewery Company Ltd. is very pleased to have reached agreement with Interbrew, the world's major brewery group, with respect to this transaction. By combining our own strength in the brewery operation and Interbrew's technical, management and financial capacitates, Zhejiang Shiliang Brewery Company Ltd. can further enhance its competitiveness and achieve better development in the future."

Interbrew is the second largest brewer in China. With this new acquisition, the company will have a production capacity of 30 million hectolitres, a market share of over 10% and 17 breweries. It has operations in the Zhejiang, Guangdong, Hubei, Hunan, Jiangsu and Shandong provinces. The company has been active in China since 1984, providing the transfer of technical and brewing know-how to various Chinese brewing companies, including the Zhujiang Brewery in Guangzhou and the Five Star Brewery in Beijing. In 1997, Interbrew entered the Chinese beer market as an operator with the acquisition of the Nanjing and Jingling Breweries. In 2002, it acquired a 24 per cent share in the Zhujiang Joint Stock Company, China's fifth largest and most profitable brewer on a per-tonne basis, and a 70 per cent stake in K.K. Group's brewing business, based in Zhejiang Province. In 2004, Interbrew acquired the China brewery activities of the Lion Group of Malaysia, providing Interbrew China with leading market positions in the six provinces where it is present. Interbrew's longstanding interaction with its Chinese partners has provided the company with strong local relationships and a good understanding of the Chinese beer market.

Interbrew's consolidated controlled subsidiaries in China have realized a double-digit organic volume increase in the first quarter of 2004, versus the same period in 2003.

ING Investment Banking advised Interbrew on this transaction and Jones Day acted as the legal counsel to Interbrew.


21 June, 2004