China Resources Snow Breweries, a joint venture between red chip China Resources Enterprise and London-listed SABMiller, will pay 749 million yuan (HK$850.19 million) for three mainland breweries to strengthen its foothold on existing markets.
The company said the acquisition, which includes a cash portion of 633 million yuan, would boost CR Snow's production capacity 4 per cent to 12.17 million kilolitres. It did not disclose how it would pay for the rest of the deal.
The deal will add one brewery each in Anhui, Liaoning, and Zhejiang provinces, where Snow has a combined 21 breweries.
'These acquisitions will enable us to strengthen our position with a wider geographical coverage and lower cost base,' said CRE managing director Chen Lang.
Analysts said the deal was attractive but the benefit would not be felt soon, given slowing demand amid the economic downturn.
Beer sales would be hit by a drop in mainland restaurant business as consumers tightened their purses, they said.
'The purchase can be interpreted as 1,600 yuan per kilolitre, compared with 3,500 yuan per kilolitre for CR Snow's acquisition of Blue Sword Group [in 2007 for 2.5 billion yuan],' said Keith Li, an analyst at CIMB-GK Securities (HK). 'Apparently, CR Snow is planning beyond the economic slowdown. The move is for long-term development.'
Mainland beer production volume grew 5 to 6 per cent last year, lagging behind the 10 to 12 per cent growth in 2006 and 2007, a recent Macquarie report said.
It expected CRE's volume growth for last year to be in line with industry growth, against more than 30 per cent growth in 2006 and 2007.
CRE shares closed down 1.24 per cent at HK$11.16 yesterday.