Hong Kong: Kingway Brewery Holdings Ltd. announced on Monday, February 28, that its parent, GDH Ltd. (Guangdong Holdings Ltd.), is still in preliminary talks with the Dutch beer company, Heineken NV, about possibly raising its stake in the Chinese brewer. "The Board has been informed by each of GDH and HAPBC (Heineken-APB (China) Pte Ltd.) that discussions between them were at a preliminary stage and remain so, that there has been no progress since 27 January 2005," Kingway said in a statement, according to Reuters.

Kingway said the preliminary discussions may or may not lead to an acquisition, which could trigger an obligation to make a mandatory offer.

A month ago, Heineken's plan to increase its stake was thrown into doubt after the Chinese company said its parent, Guangdong Holdings Ltd., had "no intention to relinquish control over the company." Kingway had said in late January that GDH would not give up control of Kingway to Heineken but talks continued on the Dutch giant's plans increase its stake from 21.44 percent. Heineken is battling with global rivals to expand its share of the fast-consolidating China beer market, the world's largest by volume.

Guangdong Holdings, controlled by the Guangdong provincial government, owns 52.63% of Kingway, while Heineken Asia-Pacific Breweries China, a joint venture between Heineken and Singapore-listed Asia Pacific Breweries Ltd. (A46.SG), has a 21.44% stake. Kingway isn't a top player in China's highly fragmented beer market, which is dominated by hundreds of state-owned firms. But Kingway's draw for Heineken is its strong market share in the southern city of Shenzhen in Guangdong, one of mainland China's most affluent regions.

Shares of Kingway have risen 28 percent over the past three months to end at HK$2.95 on Friday.

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