SABMiller Continues Expansion in China
The acquisition of the Hangzhou Xihu Beer and Huzhou Brewery follows recent strategic transactions to build CR Snow's presence in key markets and grow value.
Aug 3 2011 --- SABMiller plc announces that China Resources Snow Breweries Limited ("CR Snow"), its joint venture with China Resources Enterprise, Limited ("CRE"), has entered into an agreement with Asahi Breweries Itochu (Group) Ltd ("Asahi") to acquire from Asahi the remaining 55% equity interest in Hangzhou Xihu Breweries Asahi (Stock) Co Ltd ("Hangzhou Xihu Beer") and the remaining 25% equity interest in Xihu Breweries Asahi (Stock) Co Ltd ("Huzhou Brewery"), for a total cash consideration of approximately US$47m.
Following completion of the transaction, both companies will become wholly-owned subsidiaries of CR Snow. CR Snow acquired its existing 45% equity interest in Hangzhou Xihu Beer on 29 November 2010, and Hangzhou Xihu Beer currently owns a 75% interest in Huzhou Brewery.
The transaction will consolidate CR Snow's position in Zhejiang province, which is one of the largest markets in central China. Lager volumes in Zhejiang in the twelve months to March 2011 were approximately 28m hectolitres, representing a seven per cent increase on the prior year.
Hangzhou Xihu Beer and Huzhou Brewery are in the north of Zhejiang province, where CR Snow is already a market leader. The two companies have a combined production capacity of five million hectolitres per annum and will improve CR Snow's geographical footprint and strengthen its position in Hangzhou, the province's capital city.
Chinese expansion
The acquisition of the Hangzhou Xihu Beer and Huzhou Brewery follows recent strategic transactions to build CR Snow's presence in key markets and grow value. On 13 July 2011, CR Snow announced that it had acquired Heineken-APB's 49% equity interest in Jiangsu Dafuhao Breweries Co Ltd ("Jiangsu Dafuhao Breweries") and its 100% equity interest in Shanghai Asia Pacific Brewery Company Ltd ("Shanghai Asia Pacific Brewery").
Jiangsu Dafuhao Breweries, in which Nantong Alcohol Industry Co. Ltd will retain its 51% stake, has a strong market position in the Jiangsu province with its major beer brand, BBOSS. It owns five breweries and has an annual production capacity of 4.5m hectolitres. Shanghai Asia Pacific Brewery produces REEB, one of the most famous beer brands in Shanghai. Through its production plant in the region, the company produces c. 2.5m hectolitres annually.
Ari Mervis, Chairman of CR Snow and Managing Director of SABMiller Asia, commented: "SABMiller is committed to growing its presence in China through its joint venture with CRE. This latest transaction increases our production capacity to serve the thriving Zhejiang province. The cumulative impact of our recent transactions across China supports our confidence in this growing market with strong prospects. CR Snow is putting itself in the best position to tap into the profit pool and widen the gap between the company and its competition."
Mr. Chen Lang, Chief Executive Officer of China Resources Enterprise, Limited said: "Xihu beer is widely received in the north of Zhejiang Province and has a sound track record and huge growth potential. The acquisition will not only further strengthen CR Snow's leading position in China's beer market, but will also pave the way for the sustainable growth of our beer business. After the acquisition of the remaining stakes in Hangzhou Xihu Beer, the Group will continue to actively seek and evaluate investment opportunities in order to further expand its businesses, thereby strengthening the leading positions of its core businesses of retail, beer, food and beverage."
Snow is the largest beer brand in China (and in the world) by volume and CR Snow had a 21% share of the Chinese beer market with sales of more than 92m hectolitres in 2010.
