China: Yanjing Brewery bids for stake in Fujian Sedrin Brewery

China's third-biggest brewer by output, Beijing Yanjing Brewery Co., has entered the bidding for a stake in Fujian Sedrin Brewery Co., pitting it against potential rivals including Anheuser-Busch Cos. and Heineken Holding NV., Bloomberg communicated on November 2.

Yanjing spokesman Liu Xiangyu said in a telephone interview from Beijing said: “We have made a bid for Sedrin''. He didn't specify any price. Foreign brewers including Anheuser-Busch and Heineken are in talks to buy a controlling 39.5 % stake in Sedrin that could value the company at about $800 million, the Financial Times reported, citing people close to the situation.

A takeover would boost Beijing-based Yanjing's sales in the world's largest beer market by more than a quarter based on 2004 figures. China's last major brewer without a foreign partner would also extend its foothold in the southeastern province of Fujian after completing the 494 million yuan ($61 million) purchase of Fujian Yanjing Huiquan Brewery Co. in March.

The Sedrin sale marks a “new consolidation of China's fragmented beer industry,'' Zhao Lin, an analyst at Shenyin Wanguo Research & Consulting Co. in Shanghai. ``Demand is strong in the Fujian market.''

The number of breweries in China dropped to about 400 by the end of last year from 696 in 1997, according to SABMiller Plc, as foreign and domestic companies bought rivals to gain economies of scale and build nationwide brands.

Foreign brewers are expanding in China as sales stagnate in their domestic markets. China's beer market will expand by as much as 5 percent a year until 2008, compared with growth of 0.7 percent for the U.S. and 2.5 percent for Europe through this year, beverage research firm Canadean estimates.

A spokesman for St. Louis-based Anheuser-Busch, the world's biggest brewer, couldn't be reached immediately for comment, Bloomberg said. Tsingtao Brewery Co., 27 percent-owned by Anheuser-Busch and China's biggest beermaker by output, won't bid for Sedrin, Tsingtao spokeswoman Yuan Lu said in a telephone interview today.

“We do not comment on market rumors,'' said Sarah Koh, Singapore-based spokeswoman for Heineken-APB (China) Pte, a venture 46 percent owned by Amsterdam-based Heineken, the world's fourth-largest brewer.

Sedrin sold 720,000 tons of beer last year and had 1.15 billion yuan ($142 million) of assets at the end of May, according to a statement announcing the stake sale that was posted on the Fujian Property Rights Exchange Center, a market for trading state-owned equities.

Yanjing, which sold 2.6 million tons of beer last year, said in June 2004 that it plans to spend 2 billion yuan over six years to expand. The company said then that it had turned down approaches from the world's 10 biggest brewers, including Anheuser-Busch and No. 2 SABMiller.

Shares of Yanjing rose 0.9 percent to 5.68 yuan on the Shenzhen stock exchange today. They have slumped 28 percent this year, more than the 15 percent decline in the benchmark Shenzhen composite index. The company on Oct. 25 reported an 8.6 percent gain in third-quarter profit to 124.4 million yuan.

Yanjing has 18 beermaking plants, compared with 50 for Tsingtao. Yanjing's third-quarter sales jumped 19 percent, helped by its acquisition of a 52.4 percent stake in Huiquan Brewery.

Sedrin's controlling shareholder and another investor are offering the stake, according to the statement lodged with the Fujian exchange. Sedrin's General Manager Chen Zhihua was on a business trip and couldn't be reached for comment.

Anheuser-Busch may make more acquisitions in China, Stephen Burrows, head of the company's international operations, said in an interview on Sept. 2. The U.S. company in April tripled its stake in Tsingtao Brewery Co. to 27 percent. In June 2004, Anheuser-Busch won a $757 million takeover battle with No. 2 rival SABMiller Plc for Harbin Brewery Group.

Heineken-APB, which has been making Heineken beer at a Shanghai plant since last year, has said it wants to brew and sell its namesake brand in more Chinese provinces. The company in August ended talks to boost its stake in Kingway Brewery Holdings Ltd., based in southern China's Guangdong province, after they make ``no significant progress,'' the Chinese company said.

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