Kingway shares climb after sale of breweries announced

Shares of Kingway Brewery Holdings rose 7 per cent yesterday after the company announced it was selling its brewery business for 5.58 billion yuan (HK$6.87 billion) to China Resources Snow Breweries and a special dividend was proposed.

The Guangdong-based Kingway was up at HK$3.95 per share, the highest since it started trading in 1997, before retreating to HK$3.51 .

The stock became a hot favourite on the trading floor after Kingway proposed a special cash dividend of HK$1.71 billion, or HK$1 per share.

However, China Resources Enterprises, which has a 51 per cent stake in China Resources Snow Breweries, fell 3 per cent to HK$26.1.

Jessie Guo, an analyst at Jefferies Equity Research, wrote in a note on the deal: "This deal helps CRE to consolidate its market share, especially in Guangdong province. However, the acquisition valuation looks high."

Guo's note said CRE has cash holdings of HK$24.4 billion and the balance sheet is strong enough to pay for the deal.