Tsingtao stock surges after 171m yuan deal

PUBLISHED : Saturday, 05 January, 2008, 12:00am
UPDATED : Saturday, 05 January, 2008, 12:00am

Shares in Tsingtao Brewery, the nation's second-largest beer maker by market share, rose 9.9 per cent yesterday to HK$32.20 after it announced a connected transaction.

The company said on Thursday it would take over for 171 million yuan a 23.9 per cent stake in Tsingtao Brewery Xian Hans (Group) from its subsidiary, Xian Industrial Assets Operations.

The acquisition is expected to strengthen the Shandong-based brewery's foothold in the central region, where the beer market is most competitive.

Mainland breweries have been taking the approach of buying small production plants on the cheap to enlarge their asset base.

That also would help extend their distribution network across different provinces.

Tsingtao said in its statement the acquisition would simplify the group's shareholding structure and improve operations. The share price of the company, a Beijing Olympics sponsor, has climbed more than 14 per cent this week.

The national brand is eager to strengthen its position in the country after Snow - a rival brand operated by the joint venture of South Africa's SABMiller and China Resources Enterprise - overtook it as the country's largest beer producer.

As at the end of 2006, Tsingtao Brewery had a 13 per cent share of the domestic market, while Snow had 15 per cent. Tsingtao's earnings grew 63.4 per cent to 348 million yuan in the first half of last year on turnover of 6.74 billion yuan.