Tsingtao reform opens door to key investors

PUBLISHED : Friday, 22 December, 2006, 12:00am
UPDATED : Friday, 22 December, 2006, 12:00am

Less red tape once 30.56pc stake shifted to investment arm

Hong Kong-listed Tsingtao Brewery's provincial controlling shareholder will transfer to a wholly owned subsidiary its 30.56 per cent stake in the company - the first such transaction since the central government introduced a policy of reforming nationally owned companies by injecting them into government-held asset management firms.

The State-owned Asset Supervision and Administration Commission of the People's Government of Qingdao (SASACQ) plans to transfer 399.8 million shares in the company to investment arm Tsingtao Brewery Group, according to the listed firm's statement posted on the Hong Kong stock exchange website yesterday.

The company, which is also listed in Shanghai, said in the statement the purpose of the transfer was to strengthen the management and to rationalise the title of the state-owned A shares, which on Wednesday for the first time became tradable when the company finalised its equity reform programme.

Completion of the proposed transfer, which is still subject to a waiver by the China Securities Regulatory Commission, would cut direct ties between SASACQ and the listed company.

'After the transfer to an investment arm, it will be easier for strategic investors to buy the shares since the investment arm does not have complicated and bureaucratic procedures of the State-owned Asset Supervision and Administration Commission,' Xinhua Finance managing director Ivan Chung said.

It is unlikely, however, that the government will any time soon allow its indirectly held stake to be sold to key strategic investor Anheuser-Busch, the American beer giant that holds 27 per cent of national stalwart Tsingtao.

In September, Tsingtao announced that to compensate its minority shareholders for allowing the state-owned stake to become tradable, they would get 1.5 extra shares for every 10 they owned. The thrifty grant, which is less than the average of three extra shares handed out by reforming state-controlled companies, avoided making Anheuser-Busch the largest shareholder in the brewery.

Tsingtao's A shares resumed trading two days ago after almost three months' suspension for its reform, sending the stock price surging as much as 23 per cent that day.

But Merrill Lynch analyst Denise Chai maintained a 'sell' on the stock, saying keen foreign interest in the rapidly growing mainland beer market would force Tsingtao to increase marketing expenditure.

Snow beer, operated by China Resources and London-based SABMiller, took over market leadership in the first half of this year with 15 per cent market share to Tsingtao's 14 per cent, according to the report.

Shares of Tsingtao closed 4.93 per cent lower yesterday at HK$12.72.