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Hong Kong: China's Kingway Brewery Holdings Ltd. announced on Friday, January 28 its parent, GDH Ltd., would not give up control of Kingway to Heineken, but talks continued on the Dutch giant's plans to take a bigger stake, Reuters posted. "The board has been informed by GDH that it has no intention to relinquish control over the company," Kingway said in a statement.

Heineken's Singapore-based joint venture said talks toward raising the firm's 21.44 % stake in Kingway, which the two sides both confirmed a week ago, were continuing. "We are in preliminary talks," said Sarah Koh, a spokeswoman for Heineken Asia Pacific Breweries. Heineken is battling with global rivals to expand its share of the fast-consolidating China beer market, the world's largest by volume.

Reuters reported this week that Heineken was in talks to increase its stake in Kingway to 50 percent, a step toward a possible takeover of the firm, which is controlled, through GDH, by the government of the southern province of Guangdong, one of China's wealthiest regions.

Kingway said on Friday that negotiations to sell Heineken a bigger stake were still at a very preliminary stage, and that there had been no progress since Jan. 20. "There is no agreement regarding terms (including price and the number of shares which may be acquired)," the company said. GDH holds 52.63 percent of the company.

A source familiar with the situation told Reuters on Monday that the two companies were discussing a deal priced between HK$3.50 and HK$4.00 per Kingway share. Kingway shares closed at HK$2.825 on Friday, down eight percent from Thursday's close.

In recent years, global beer makers have flooded into China as incomes and spending power surge. Heineken is on an acquisition spree to bolster its position in rapidly growing markets such as China and Russia.

Kingway does not rank among China's 10 largest brewers, but is seen as an attractive takeover candidate because of its strong position in the southern boomtown of Shenzhen, adjacent to Hong Kong. It has a market capitalization of US$550 million according to Reuters data.

Kingway shares have surged by 40 percent since late last week on expectations that Heineken, the world's fourth-largest beer maker by sales, would boost its holding in the firm.

Last year, global giants Anheuser-Busch and SABMiller mounted an unprecedented bidding war for China's Harbin Brewery Group that resulted in Anheuser-Busch paying $692 million for the company.



30 January, 2005