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April 4, 2011, 12:20 p.m. EDT

Kingway Parent Intervenes in China Beer Deal

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By Polly Hui

HONG KONG—Kingway Brewery Holdings Ltd., maker of Kingway Beer, said Monday its state-owned parent company exercised a right to buy a 21.37% stake in the brewer held by Heineken-APB (China) Pte., a Singaporean-Dutch joint venture.

In buying the 21.37% stake, GDH Ltd., Kingway's parent company, thwarts a plan by conglomerate China Resources Enterprises Ltd. to acquire the holding. GDH, which currently owns 52.5% of Kingway Brewery, will acquire the additional shares on the same terms that Heineken-APB (China) earlier proposed to sell to China Resources, which makes China's top-selling beer, Snow.

Last month, Heineken-APB (China), a 50-50 joint venture between Singapore-listed Asia Pacific Breweries Ltd. and Dutch brewer Heineken NV /zigman2/quotes/205347870/delayed NL:HEIA -0.87% , said it was selling 365.8 million shares in Kingway, in a deal valued at CNY1.08 billion ($164.7 million).

The sale marks the end of a seven-year tie-up between Kingway and Heineken-APB, which first bought a stake in Kingway in 2004 as a strategic investment.

China Resources—which makes its popular Snow beer in a joint venture with London-based SABMiller PLC—is owned by one of China's biggest state-owned conglomerates, China Resources Group.

China Resources has been steadily buying up stakes in small brewers in China, the world's largest market for beer, in its efforts to remain China's biggest beer maker amid intense competition. The conglomerate said last month it has completed several acquisition of brewing assets in China's Heilongjian and Henan, as part of its plan to broaden its geographical coverage and strengthen its market position.

Kingway said last month when it announced the sale of the stake to China Resources that its parent, GDH, had a pre-emption right to acquire the shares.

GDH is owned by an investment arm of the Guangdong provincial government and said it will have a 73.82% stake in Kingway following its exercise of the pre-exemption rights. It wasn't immediately clear if GDH will need to make a mandatory general offer for all Kingway shares it doesn't already own as per Hong Kong stock exchange regulations.

A spokesman for China Resources Enterprises said the conglomerate wouldn't comment on Kingway's announcement at this stage.

Two weeks ago, China Resources' Chief Financial Officer, Frank Lai , said the proposed stake acquisition of Kingway was a long-term investment for the group.

China Resources' Snow brand is the world's No. 1 brand by volume and the largest beer brand in China, with a market share of about 21% in the country as at the end of 2010, the company said following the release of fourth quarter earnings late last month. Its beer is produced by China Resources Snow Breweries Ltd, which is 51%-owned by the Chinese conglomerate and 49% by SABMiller.

Citing government data, China Resources said Tsingtao beer had a 14% market share and Anheuser-Busch InBev /zigman2/quotes/209225053/composite BUD +1.67% had a 12% share. It didn't give a share for Kingway.

As of the end of 2010, China Resources had more than 70 breweries in China with an annual production capacity of more than 14.5 billion liters, or 3.8 billion gallons.

NL : Netherlands: Euronext Amsterdam
-0.86 -0.87%
Volume: 518,694
March 30, 2023 5:37p
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€56.66 billion
Rev. per Employee
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+1.09 +1.67%
Volume: 1.61M
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