APB sells Kingway stake

Kingway Brewery Holdings Ltd, a Chinese brewer, said Heineken-APB (China) Pte Ltd had agreed to sell its entire stake in the company at a price representing a 63 percent premium over the last closing price.

The Shenzhen-based brewer said its shareholder, Heineken-APB, had agreed to sell its 21.37 percent stake in Kingway for 1.08 billion yuan ($160 million), according to a statement released by Kingway on the Hong Kong Stock Exchange website over the weekend.

Heineken-APB is the second largest shareholder of Kingway Brewery and an associate company of Singapore-listed Asia Pacific Breweries Ltd (APB).

China Resources Enterprise Ltd. has agreed to buy the stake in the brewer, according to a filing to the Hong Kong Stock Exchange Wednesday.

"The offer represents an estimated premium of 72 percent over the book value of our investment resulting in a gain of approximately 76 million Singapore dollars ($60 million) after deducting foreign exchange and transaction related expenses," APB chief executive Roland Pirmez said in a statement.

"By virtue of its 50 percent stake in Heineken-APB China, APB's share of the gain from disposal will be approximately S$38 million ($29.98 million)," Pirmez added.

Trading in the shares resumed Monday after suspension Wednesday.

Kingway Brewery ranks among the top 10 brewers by sales in China with almost 1 million tons of annual sales.

Operating seven breweries in China, South China's Guangdong Province is Kingway's biggest market.

China Resources is the parent company of China Resources Snow Brewery, which controls one fifth of China's beer market with estimated sales of $1.3 billion last year.

The company has been aggressive in recent years in growing its business through organic growth and acquisitions.

In January, China Resources announced it had acquired local brand Aoke beer in Henan and that it planned to gain a 50 percent market share in the central China province.

Li Baojun, president of SOCIET Insight & Decision consulting company, told the Global Times that the deal showed China Resources' ambition to achieve a back-door listing and move into the southern market in China.

"It's likely that China Resources Snow Brewery, a non-listed company, will purchase all stakes of the Hong Kong-listed Kingway Brewery eventually and get listed. It will also seek to swallow the southern Guangdong market," he said.

"Fewer targets for acquisition are left in the market and China's brewery industry will be increasingly dominated by giant companies," Li said, adding that he expected a merger among two of the big four breweries in the country – Tsingdao, Snow, Yanjing and AB InBev – to form a larger giant.

Kingway Brewery pointed out that the deal for China Resources to buy Heineken-APB's stake will lapse if GDH Limited, the controlling shareholder of Kingway Brewery, exercises its pre-emption right to acquire the shares on the same or equivalent terms that have been offered to Heineken-APB.