Originally created 05/25/04

SABMiller bids for Chinese brewery, setting stage for takeover battle



SHANGHAI, China -- SABMiller, the maker of Miller Lite beer, has formally launched an unsolicited takeover bid to buy the rest of China's fourth-largest brewery for $390 million.

The offer for Harbin Brewery Group Ltd. was posted Monday on the Web site of the Hong Kong Stock Exchange, where Harbin Brewery's shares are traded. SABMiller already owns 29.6 percent of Harbin.

The offer for the rest of Harbin could set up a takeover fight with U.S.-based Anheuser-Busch Cos., the world's biggest brewer and maker of Budweiser, which recently acquired a 29 percent stake in the Chinese brewery for $139 million.

There is intense foreign interest in grabbing a piece of China's beer market, where a surge of foreign investment turned the country into the world's biggest beer producer in 2002, surpassing the United States.

Harbin Brewery, a 100-year-old company that is one of China's oldest beer producers, has indicated it prefers St. Louis-based Anheuser-Busch as a partner, but hasn't given reasons for the preference.

The Chinese brewer, based in the northeastern city of Harbin, makes the Hapi brand. Like most Chinese brewers, it is little known outside its home region. But in China, even regional markets are seen as having huge potential - especially in the northeastern rust belt, where beer consumption is relatively high.

London-based SABMiller, the world's second biggest brewer, is offering 4.30 Hong Kong dollars (55 U.S. cents) a share in cash for the shares of Harbin Brewery that it doesn't own, on the condition that it acquires a majority stake. Anheuser-Busch paid 3.70 Hong Kong dollars (47 U.S. cents) per share for its stake.

Graham Mackay, SABMiller's chief executive, tried to reassure shareholders, saying in a statement issued in London that its bid was intended to "ensure a positive future for Harbin Brewery's brands, breweries and employees."

SABMiller has interests in 30 Chinese breweries and a 49 percent stake in China Resources Breweries Ltd. - China's second-largest beer-maker after Tsingtao Brewery Co. Last week, it announced the purchase of a 90 percent stake in two small breweries in eastern China's Anhui province.

SABMiller says it plans to combine the facilities of Harbin Brewery and China Resources in China's northeast to raise profits without cutting jobs at either Chinese partner.

"Any changes made to the current structure will be designed to protect the unique heritage of Harbin Brewery, its brands, breweries, employees and other interested parties," SABMiller said in a statement.

Anheuser-Busch said last week that it had acquired a 29 percent stake in Harbin Brewery although that deal is apparently subject to government approval.

The brewer also owns 9.9 percent of Tsingtao Brewery Ltd. and has an agreement to increase ownership to 27 percent over the next several years.

Budweiser is the most widely sold foreign brand beer in China.

A spokesman in Hong Kong for Anheuser-Busch had no immediate reaction to the SABMiller offer.

SABMiller's offer is four times the value of Harbin Brewery's net assets last year. But it is below the Chinese brewer's closing price of 4.975 Hong Kong dollars (64 U.S. cents) last Friday in Hong Kong.

In midday trading Monday on the New York Stock Exchange, Anheuser-Busch shares were up 24 cents at $51.79.

On the Net:

Harbin Brewery: http://www.hapi.com.cn/english/

Anheuser-Busch: http://www.anheuser-busch.com/

SABMiller: www.sabmillerasia.com.cn