Stock sale could make Tsingtao a foreign firm

PUBLISHED : Monday, 19 September, 2005, 12:00am
UPDATED : Monday, 19 September, 2005, 12:00am

The government's order to listed companies to float their state shares could have an unintended result - turning Tsingtao Beer, China's only global brand name, into a foreign company.

The China Securities Regulatory Commission has told the 1,400 listed companies to draw up plans to sell the two-thirds of their shares that are owned by state institutions, in order to make the shares tradable.

So far, 46 companies have published their flotation plans, which offer holders of tradable shares a gift of shares or money to compensate for the drop in the value of the stock when the shares are finally sold. The average is about three shares for every 10 held.

The problem for Tsingtao is that a foreign company, Anheuser-Busch of the United States, owns 27 per cent, just behind the 30.56 per cent held by the State-Assets Supervision and Administration of Qingdao (Sasaq), the city in which the company is based.

If Tsingtao adopts a plan similar to those of the other 46 companies, the share of Sasaq will fall below that of Anheuser-Busch, which will become the biggest shareholder. Since Sasaq holds state shares, it will receive no compensation.

To avoid this, Tsingtao is considering a payment of cash instead of shares.

But there is a problem with this, too. The compensation plan does not cover holders of H and B shares, but the H and B shares of Tsingtao outnumber its A shares.

So, while the payment of cash would be legal, it would be unfair, and the H shareholders will protest to the CSRC if they are excluded.

A shares in Tsingtao closed at 8.89 yuan on Friday, while the H shares closed at $8.30 on Thursday.

Tsingtao spokesman Zhang Ruixiang on Friday said that the company had not completed its flotation plan and there was no timetable for doing so.

'Because we have H and B shares, there is dispute over the plan. This is not a problem unique to us but to many firms. The CSRC will have to step in and make a ruling. We have not discussed the issue of whether we will become a foreign company,' he said.

The rub is that Tsingtao is by far China's No1 exporter, accounting for half of the nation's beer exports, to more than 30 countries in Asia, Europe and North America.

It is the country's best known global brand.

Listed in Shanghai and Hong Kong, Tsingtao is China's largest beer maker in terms of revenue, with about a 14 per cent share of the domestic market.

For the first six months of this year, it reported a net profit of 173.6 million yuan on revenue of 4.46 billion yuan, up from 144.4 million yuan and 3.87 billion yuan in the same period last year.

Tsingtao is rare among listed companies in that a majority of its shares are already tradable. In most listed firms only about a third are tradable.