Interbrew lifts China beer share with US$131m stake
Belgian company secures 50pc of Lion Group's operations in the mainland
Interbrew has paid US$131.5 million to secure a 50 per cent stake in the China brewing operations of Malaysia's Lion Group.
The acquisition will more than double the Belgian beer giant's annual brewing capacity on the mainland to about 23 million hectolitres, making it the third-largest brewer in China after two Sino-foreign consortiums that pair Tsingtao Brewery Group with Anheuser-Busch and SABMiller with China Resources Enterprise.
Interbrew said the deal would increase its market share on the mainland to 9 per cent.
In the first half, Tsingtao and Anheuser-Busch were estimated to control 13.8 per cent of the mainland market, followed by SABMiller and China Resources' 11.7 per cent and Beijing-based Yanjing's 8.7 per cent.
The deal also gives Interbrew an option to buy Lion's breweries outright for a further US$131.5 million. The option can be exercised 12 months after the completion of the transaction, which is expected in the first quarter of next year.
Interbrew was advised by ING.
'It is very likely that they will exercise the option,' said a source close to the deal.
'This was a pretty hard-fought transaction. There were lots of other bidders for these assets. We were in a race with the SABMiller-China Resources consortium, San Miguel and Asia Pacific Brewery.'
Interbrew said in a statement: 'This transaction marks a continuation of Interbrew's strategy to expand in China to become a major player in the domestic market, through a focused approach that targets the coastal areas.'
The strategic partnership provides Interbrew, which has a presence in Guangdong, Zhejiang and Jiangsu provinces, an entry into Hubei, Hunan and Shandong.
Faced with saturated markets in North America and Europe, international brewers are rushing to increase their presence in China's 20 billion-litre beer market, principally through mergers and acquisitions.
Earlier this year, SABMiller of South Africa made its second significant investment in China by acquiring a 29.6 per cent holding in Harbin Brewery Group, one of the largest brewery concerns in the mainland.
Unlike its main rivals SABMiller and Anheuser-Busch, who have formed strategic nationwide partnerships with large domestic brewers, Interbrew has built up interests in a range of smaller breweries.
And rather than aggressively push its own international brands in China, Interbrew focuses on shoring up the strength of its locally acquired brands in their home municipal and provincial markets.
Interbrew first entered China in 1997 after acquiring a controlling stake in two breweries in Nanjing - Jinling Brewery and Nanjing Brewery - and merging their operations.
It acquired the Jinling stake from a private Hong Kong-based investor, Tan Wai-kee, who now runs Interbrew's China operations from Shanghai.
The Nanjing investment was initially a difficult one for Interbrew, which struggled with a cooler macroeconomic climate in the late 1990s and complications stemming from the merger.
'Nanjing was a poorly performing asset,' said the source close to the deal.
'They've finally turned it around and it's now profitable.'
Last year Interbrew took a 24 per cent share in Guangzhou-based Zhujiang Joint Stock, China's fifth-largest brewer, and a 70 per cent stake in KK Group's brewery business, based in Zhejiang province.
