CR Snow takes Blue Sword for 2.5b yuan
China Resources Snow Breweries, a joint venture between red chip China Resources Enterprise and London-listed SABMiller, will pay 2.5 billion yuan to buy local partner Blue Sword Group to strengthen its foothold in Sichuan province and penetrate Guizhou province.
The acquisition includes a 38 per cent equity interest in 14 Blue Sword brewery companies in Sichuan, of which CR Snow now owns 62 per cent.
CR Snow will also take a 100 per cent interest in a brewery in Guizhou.
Analysts said the purchase was attractive, which is at about 16 times the assets' earnings for last year, or US$42 per hectolitre.
Shares in China Resources Enterprise were trading at about 24 times earnings while those of Tsingtao Brewery were trading at 50 times.
Belgium's InBev, which produces Stella Artois and Beck's beer brands, spent about US$80 per hectolitre, or a total of 5.89 billion yuan, in January last year to acquire Sedrin Brewery in Fujian province, analysts said.
Blue Sword, the leading brewer in the country's southwestern region, operates 13 breweries with CR Snow in Sichuan that can produce a combined 1.56 million kilolitres of beer a year.
A new brewery with a capacity of 160,000 kilolitres will start production in the middle of this year, according to China Resources Enterprise and SABMiller, the world's No2 brewer.
Its Sichuan breweries, which enjoyed a market share of about 70 per cent in the province last year, sold 908,000 kilolitres of beer in 2005.
Blue Sword's brewery in Guizhou, which has an annual production capacity of 80,000 kilolitres, sold 41,000 kilolitres in 2005, accounting for a 15 per cent market share of the province.
China Resources Enterprise said the assets CR Snow bought generated a net profit of HK$96 million in 2005, up 40 per cent from HK$68 million a year earlier.
For the first nine months last year, net profit increased 55 per cent to HK$151 million.
'Sichuan is a major profit centre for CR Snow and its contribution has been rising rapidly on expanding market share,' China Resources Enterprise managing director Mark Chen Shulin said.
'The acquisition will boost our operational efficiency in the western and southwestern regions and strengthen our brand portfolio.'