E-Malt.com News article: 4583

China: Dutch brewing force Heineken N.V. announced on March 31 that it has reached an agreement, through its associated company, Heineken-APB (China) Pte Ltd (HAPBC), with Nantong Alcohol Industry Co., Ltd to acquire a 40% stake in Jiangsu DaFuHao Breweries Co, Ltd (DaFuHao).

The total acquisition is valued at USD 28.6 million (EUR 22.1 million) of which Heineken's share is 46.1% (or EUR 10.2 million). The transaction will be funded from existing cash resources. The investment is expected to be earnings accretive in 2005. The deal is subject to necessary consents as well as approvals of the relevant local authorities.

As a result of this transaction, HAPBC's market position is significantly strengthened in the adjacent provinces of Jiangsu and Shanghai.

Thony Ruys, Chairman of the Executive Board of Heineken N.V. said, "Jiangsu DaFuHao Breweries' profitability in a competitive market such as Jiangsu, is a testament to its strength. With a strong position in one of the key beer markets in China, the acquisition of DaFuHao is a further step in our long-term growth path in China. It is consistent with Heineken's strategy of focusing on acquiring interest in breweries with quality earnings stream. Furthermore, it’s an excellent opportunity for the Heineken brand to benefit from DaFuHao’s distribution network in the Nantong region for further growth."

DaFuHao, incorporated in 1996, is based in the city of Nantong, located in the Jiangsu Province, on China's southeast coast. Being one of the most profitable breweries and ranked amongst the top five brewers in Jiangsu, DaFuHao owns four breweries with a total production capacity of 3.5 million hectolitres in Nantong, Tongzhou, Qidong and Yancheng. It brews, markets and distributes major beer brands including "BBOSS", Tongzhou and Changjiang, which are popular in Nantong. The flagship brand "BBOSS" is also marketed and sold in other parts of the Jiangsu Province. The brewery has a 12% market share in the Jiangsu province and 60% market share in the 1.6 million hectolitre Nantong region. In 2003 DaFuHao sold a volume of 1.4 million hectolitres and the turnover was EUR 22 million. The brewery employs approximately 1,200 staff.

The DaFuHao stake is HAPBC's second recent investment in China. In January 2004 it acquired a 21% interest in Kingway Brewery, which brews the Kingway beer in Guangdong province and is one of the most profitable listed brewers in China. HAPBC also owns Shanghai Asia Pacific Brewery, where Heineken beer is brewed for the Chinese market and Hainan Asia Pacific Brewery.

HAPBC, in which Heineken has an indirect stake of 46.1% and Fraser & Neave 43.9%, combines all activities of Heineken and Asia Pacific Breweries in China. HAPBC is a 50/50 joint venture between Asia Pacific Investment Pte Ltd (APIPL) and Asia Pacific Breweries Limited (APBL). APBL is controlled by its parent company APIPL, a joint venture, with equal shareholders' and boards' voting rights, between Heineken and Fraser & Neave Limited.

China is the largest beer market in the world with a sales volume of 291 million hectolitres of beer in 2004 and an annual growth rate of about 15%. The expected growth rate is higher in the coastal regions, where Jiangsu is located. The provinces Jiangsu and Shanghai form part of the densely populated Yangtze River Delta. With a population of about 73 million people and an estimated total beer volume of 14.6 million hectolitres per year, Jiangsu is one of the largest and wealthiest beer markets in China.

Heineken N.V. is the most international brewer in the world. The Heineken brand is sold in almost every country in the world and the company owns over 115 breweries in more than 65 countries. With a total volume of 113 million hectolitres Heineken ranks second in the world beer market in profitability. Heineken strives for an excellent sustainable financial performance through marketing a portfolio of strong local and international brands with the emphasis on the Heineken brand, through a carefully selected combination of broad and segment leadership positions and through a continuous focus on cost control. In 2004 net turnover amounted to EUR10 billion and net profit before exceptional items and amortisation of goodwill amounted to EUR791 million. Heineken employs over 60,000 people. Heineken N.V. and Heineken Holding N.V. shares are listed on the Amsterdam stock exchange. Prices for the ordinary shares may be accessed on Bloomberg under the symbols HEIA NA and HEHN NA and on the Reuter Equities 2000 Service under HEIA.AS and HEHN.AS.


03 April, 2005