Beer Makers Eye China's Kingway Assets


HONG KONG—Anheuser-Busch InBev NV and Tsingtao Brewery are among several companies considering bids for the brewery operations of Chinese beer maker Kingway Brewery Holdings Ltd., people familiar with the situation said Friday.

All bids for the Guangdong province-focused assets are due by the end of February, the people said, and there will be a six- to eight-week due diligence period after that.

Kingway, which had a market capitalization of 4.28 billion Hong Kong dollars (US$550 million) as of Friday, plans to sell the Kingway brand and brewery assets, one person said.

Other potential bidders for the assets include Hong Kong-listed China Resources Enterprise Ltd., which makes the Snow beer brand, the people said. Anheuser-Busch, whose flagship brand is Budweiser, already has a stake in Harbin Brewery, which is focused on northeastern China.

"This is one of the few independent beer assets available to buyers in China, so there is a wide range of interest," said one person familiar with the deal.

Kingway beer is popular in Guangdong province, which borders Hong Kong and is one of the wealthiest provinces in China. Kingway is estimated to be the third-largest player in Guangdong, with approximately 15% market share, according to a Feb.3 Piper Jaffray report.

Increasing labor and raw-material costs are likely to put pressure on small breweries and regional players, prompting some to exit the market either by selling assets or brands, analysts have said.

China Resources Snow Breweries Ltd., a joint-venture between China Resources and SABMiller PLC, has been actively acquiring smaller brewers recently. CR Snow in August acquired the stakes it didn't already own in both Hangzhou Xihu Beer and Huzhou Brewery in Zhejiang province.

Foreign brands, too, are keen on China. In 2004, London-based SABMiller, the brewer of the Miller brand, unsuccessfully battled rival Anheuser-Busch for China's Harbin Brewery Group Ltd.

On Jan. 20, Kingway said it had established a committee to conduct a strategic review of the company, in particular to look at ways to improve profitability and create new income streams. As part of that process, Kingway said it would invite third-party entities to submit proposals and indicative offers for some of its brewery businesses and assets.

Kingway reported that half-year revenue rose 14% to HK$892 million, while earnings were down 84% to HK$1.5 million as costs rose.

The Kingway assets could widen the acquiring party's distribution network in China and help to lower fixed and input costs, analysts said.

2005-2011 All Rights Reserved 京ICP备05069564号-1