China: Yanjing Brewery Co. denies takeover by world beer leader InBev

China's industry bellwether Beijing Yanjing Brewery Co. rejected a rumour that it is to sell a strategic stake to InBev, the world's biggest brewery by sales volume. Yanjing has never talked with any outside company, including the Belgium-based peer, regarding strategic investment according to Ding Guangxue, deputy general manager at the brewery, SinoCast China Financial Watch Via Thomson Dialog NewsEdge released September 13.

“Presently, Yanjing is under the smooth development and there is no need for it to bring in strategic shareholders,” he said.

Yanjing, whose stock is traded on Shenzhen's exchange, was earlier said to either sell a 20 percent stake to InBev for a 2.5 folds premium to net asset; or a 10 percent stake for a 5 folds premium. Either plan was said to cost the buyer at least CNY2.3 billion.

Based in Beijing, Yanjing in 2005 earned CNY5.314 billion in revenues from the main business, up 13.76 percent from a year ago. The net profits inched up 2.3 percent to CNY277 million. It, with a market share of 85 percent in the Chinese capital, is expected to maintain a gross profit margin of 45 percent to 46 percent this year.

Together with its larger rival Tsingtao Brewery Co., it last August became one of the official sponsors of the Beijing 2008 Olympic Games and began to produce and sell beer with the official Olympic logo.

Nationwide, Yanjing's 2005 sales volume of 3.12 million tons was beaten by Tsingtao with 4.08 million tons and China Resources Snow Breweries with 3.95 million tons. Still, Yanjing is the only top-three beer maker that has not entered an alliance with a foreign buyer. Tsingtao has teamed up with US-based Anheuser-Busch and China Resources Snow Breweries has partnered with SAB Miller, a London-listed brewing group created in 2002.

Apart from an InBev link, Yanjing was also rumoured to be likely to choose Dutch beer giant Heineken NV as the strategic investor. Like the aforesaid global top beer brands, Heineken is active in the beer market of the world's most populous nation after tapping into it in the 1990s. It suffered a declining performance in China but has been rebounding as of 2005 when the sales rose 12 percent. Heineken is joining hands with Chinese second-tier beer companies, like Kingway Brewery (0124.HK), headquartered in the southern city of Shenzhen. It lags far behind InBev, Anheuser- Busch and SAB Miller here, pointed out insiders, adding the Dutch player is to face a tougher competition once Yanjing is acquired by other foreign rivals.

The beer market in China represents a bonanza as the annual growth rate is higher than 30 percent while the markets in western countries have been shrinking gradually in recent years. Emerging as a global prominent brand in the 1950s, Heineken so far has teamed up with over 100 beer companies in 50 nations and sold its products in more than 170 countries around the world. In the first half of 2006, it reaped up to €433 million net profits, a 25.5 percent jump from a year ago. The revenues gained 11 percent to €5.74 billion mainly driven by the bullish sales in Africa, America and Eastern Europe.

Previously, on September 10, media reported that Yanjing Brewery will issue new shares to InBev, the world’s leading brewery by volume. It was said the new shares must be issued at CNY21 per share. The stock offer should to be disclosed on or around China's National Day, October 1.

(USD1 = CNY7.9; USD1 = €0.7)

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .