Mergers & Acquisitions

China Resources Beer to raise HK$9.5b in rights issue to part-fund SABMiller stake purchase

Country’s biggest brewer reveals deeply discounted offer

PUBLISHED : Wednesday, 06 July, 2016, 12:25pm
UPDATED : Thursday, 07 July, 2016, 12:14am

China Resources Beer, the country’s biggest brewer, is planning to raise HK$9.5 billion as it prepares to buy the remaining 49 per cent stake in China Resources Snow Breweries, a joint venture it currently owns with London-based SABMiller.

The Chinese state-owned conglomerate said on Wednesday part of the money raised would be used to fund the purchase, that will see CR Beer gain full control of the popular Snow beer brand.

The rights issue, likely to be one of the largest in Hong Kong since last year, is being priced at a 30.8 per cent discount to Tuesday’s closing price of HK$16.94.

The company plans to issue around 811 million new shares at HK$11.73 for every three existing shares held. CR Beer’s shares closed Wednesday at HK$16.26, down 4.01 per cent.

“We opted for a right issue together with other tools to finance our acquisition as that can boost our balance sheet and make us more flexible for future M&A opportunities,” its Chief Financial Officer Lai Po-sing said.

“We will continue to explore business expansion opportunities through both organic growth and acquisitions,” Chen Lang, chairman of CR Beer said.

“We consider the rights issue to be in the best interests of the company and its shareholders as a whole.” The deal to buy SABMiller’s stake was first agreed in March.

CR Beer’s co-owned Chinese brand Snow is the world’s largest seller, accounting for 23.2 per cent of the beer market in China in 2014, according to data from Euromonitor, a market research firm.

But it is facing growing competition from domestic players, including Tsingtao Brewery and Beijing Yanjing Brewery, as well as a shifting preference among Chinese consumers who are turning to foreign brands such as and Carlsberg and Budweiser.

Hou Xiaohai, CR Beer’s chief executive officer, said he did not see any signs of recovery in the country’s beer market for the time being in view of the flagging economy and severe flooding across many parts of the country during summer.

The acquisition of SABMiller’s stake is anticipated to go through by the end of this year, but is still pending approval from China’s anti-monopoly regulators.

Over the last year, big transactions of this kind in Hong Kong have includes a rights issue by Chinese conglomerate Fosun International, which raised over HK$11.6 billion last September.