SABMiller buys 29.6pc stake in Harbin Brewery for $675m
Global beer giant SABMiller has made its second significant move into the mainland with the purchase of a 29.6 per cent stake in Hong Kong-listed Harbin Brewery Group.
In the latest acquisition by foreign brewery firms looking to quench the thirst of mainlanders, the world's No2 brewer said the investment would make it the biggest foreign beer player in China.
In 1994, SABMiller and red chip China Resources Enterprise formed 49:51 joint venture China Resources Brewery (CRB) - the mainland's second-largest brewer behind Tsingtao Brewery.
CRB operates 30 breweries in nine mainland provinces and has total annual production volume of more than 27 million hectolitres.
Harbin Brewery, which ranks No4 in China, has an installed capacity of about 12.5 million hectolitres and is a market leader in the northeast with annual sales of HK$1.11 billion.
Faced with saturated market at home, foreign firms such as United States-based Anheuser-Busch and Interbrew of Belgium are rushing to grab a slice of China's beer market, which is second only to the US in consumption and the world's largest by production volume.
London and Johannesburg-listed SABMiller, formed from the merger last year of South African Breweries and Miller Brewing of the US, said yesterday it had agreed to buy China Enterprise Development Fund's (CEDF) stake in Harbin Brewery for HK$675 million.
The deal marks the Dublin-listed investment fund's exit from the mainland beer market after seven years, in which it earned a profit of about US$71 million, according to CEDF director Peter Jeva Au.
The Harbin municipal government holds a 34.6 per cent stake in Harbin Brewery.
Analysts said SABMiller's latest investment would cast some doubt on its partnership with China Resources Enterprise, which competes with Harbin Brewery in northeastern China.
UBS analyst Joe Zhang said SABMiller might eventually seek to take over Harbin Brewery and expand without China Resources Enterprise, as the red-chip conglomerate was financially burdened by its retail expansion.
However, SABMiller chief executive Graham Mackay said the company remained 'committed'' to CRB.
Frank Ning Gaoning, chairman of China Resources Enterprise, said that with SABMiller as a significant shareholder in both CRB and Harbin Brewery, there was potential for an improvement in the operating environment in northeastern China which could lead to increased profits.
China's beer production rose about 7 per cent to 238.6 million hectolitres last year.
The three leading brewers - Tsingtao Brewery, CRB and Yanjing Brewery - control less than 30 per cent of the mainland market, with more than 400 players sharing the rest.
Thirst quenching
The investment will make SABMiller the biggest foreign player in China's beer market
Despite its commitment to CRB, UBS analyst Joe Zhang says the company may seek to eventually take over Harbin Brewery
Beer production in the mainland rose 7 per cent last year
