Tontine Wines Announces Possible Deal Regarding
 Acquisition/Investment of Approximately 60% Interest in A Top 10 China Grape Wines Producer - Yantai Baiyanghe
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Joining Forces Create Synergies to Achieve Industry Leadership through Complementary Strengths and Shared Resources
 
(Hong Kong, 7 November 2011) – China Tontine Wines Group Limited ("Tontine Wines" or the "Group", Stock code: 0389), one of the largest grape wine producers in the PRC, announced to  enter into a memorandum of understanding (the "MOU") for a possible transaction (at the consideration to be mutually agreed) which, if materialized, may lead to the acquisition or investment of approximately 60% equity interest (the "Proposed Transaction") of 煙台白洋河釀酒有限責任公司 (Yantai Baiyanghe Winery Co., Inc) ("Yantai Baiyanghe"). A formal agreement governing the Proposed Transaction is endeavored to sign within 180 days from the date of the MOU.

Yantai Baiyanghe was founded in 1958 and is located in Qixia City along Baiyang River in Jiaodong Peninsula, Shandong Province. Qixia City is under the jurisdiction of Yantai, which is at the same latitude as the world-renowned Bordeaux wine-producing region in France, and is the golden area for wine production in the PRC, and the only international vine and wine city in Asia.

Yantai Baiyanghe is principally engaged in the production and sale of alcoholic beverages. Its wine portfolio contains over 80 types of wine products and stretches across, among others, grape wine, brandy and rice wine in many varieties (including premium imported wines from countries overseas, like France, Australia and Chile). The proportion of sales of grape wine is approximately 90%, dry and sweet grape wines account for around 70% and 30% respectively, while domestic and imported wines are approximately 80% and 20% of the total revenue respectively.

Yantai Baiyanghe has built an extensive sales network covering all provinces and cities in the PRC. It mainly sells its products through supermarkets, cigarette and wine shops, franchise shops, group purchase and entertainment venues. It has opened over 100 franchise shops. Its main markets include Guangxi, Shandong, Fujian, Zhejiang and Jiangsu, with sales in these areas accounting for approximately 60% of total sales.

Yantai Baiyanghe is one of the top ten enterprises in China’s grape wine industry. To further enhance product quality and wine making technology, it invited Mr. Maxime Jacaues Marie Charles Godet (馬克西高帝先生), a French winemaker, to join the company in 2006.  Yantai Baiyanghe was awarded the "中國葡萄酒制造業十強企業" (Top 10 Grape Wines Producers of the PRC) by 中國食品工業協會 (The China Food Industry Association) in 2010. It currently owns five patents and has been awarded various honours including the "中國馳名商標" (Famous Trademark in China), "綠色食品A級標準" (Green Food-Class A) and "原產地保護產品" (Country of Origin Protected Product of the PRC).

Mr. Wang Guangyuan, Chairman and Chief Executive Officer of the Group, said, "The Proposed Transaction, if materialized, would offer a good opportunity for the Group to expand its sales and distribution network in the PRC, enhance its wine products portfolio and strengthen its competitive position in the PRC."

The proposed acquisition of or investment in Yantai Baiyanghe, if successfully implemented, would (i) enlarge both the Group’s own premium high-end grape wine and imported wine portfolios, enrich the Group’s wine products portfolio and broaden its fine wine offering to its customers on the one hand and (ii) upgrade the Group’s wine making technology, enhance the level of product quality, increase production capacity, achieve economies of scale and lower production costs through integration of the production lines of the two enterprises on the other hand. It is also one of the plans of the Group to integrate the sales and distribution channels of the two enterprises so as to expand the sales and distribution network of the Group and effectively reduce marketing and promotion expenses which, in turn, is expected to enhance the Group’s profitability in the long run. All the above factors are expected to offer synergy effects and complementary benefits realization, allow resources-sharing, provide incentive for long-term collaboration and ultimately achieve a win-win situation for the Group and Yantai Baiyanghe, which are instrumental to the future business development of the Group.

In light of the above, the Proposed Transaction, if consummated, is in the interests of the Company and its shareholders as a whole.

Source:todayir.com