China: InBev wins bid for Fujian Sedrin Brewery, sources said, InBev no comment

Belgian beer giant InBev SA declined to comment on rumours it is set to acquire Chinese brewer Fujian Sedrin for around USD 750 mln, AFX posted on December 14. Earlier, analysts said the brewer is close to completing the deal.

Media sources reconfirmed on December 14 that Belgium's InBev has won the bidding war for a controlling stake in Fujian Sedrin Brewery with a US$750 million offer.

InBev has a production capacity of more than 30 mln hectoliters in China, with a market share of around 10 %.

The global brewing giant, whose brands include Stella Artois and Beck's, beat the Netherlands' Heineken NV, Anheuser Busch Cos. of the U.S. and Beijing Yanjing Brewery Co. for the stake in Fujian province's biggest brewer in production terms, Dow Jones Newswires cited analysts.

However, analysts commented that the price paid for the state-owned Chinese brewer in Fujian province could be expensive, as a result of a bidding race with peers Heineken NV and Anheuser-Busch Cos Inc.

They added the final price will likely be much lower than the US$750 million offer reported in a New York Times article. "The final price will be much lower than the US$750 million because Sedrin's management and staff also own shares in the brewer," a source said.

"There's a lot of concern from potential buyers that the management, once they get their big pay-off, will stop coming to work," he said. "Sedrin's one of the companies that about 10 years ago was earmarked as being in an industry that could be privatized, so employees had a chance to subscribe to shares." Another source said that additional due diligence was needed on the brewer. There was some confusion about the size of the holding being bought.

The sources close to the deal said that InBev's bid was for all of the Chinese brewer, including the 39.48% owned by the state, as well as the holdings owned by employees, and some suppliers and vendors. But an official in Sedrin's planning department said the stake on offer was just the 39.48% owned by the government, and the sale was still going on.

Sedrin was quoted on the Fujian Assets and Equity Exchange on Aug. 31 as inviting international bidders for 39.48% of its shares. Fujian Sedrin has a 60% share of the beer market in Fujian province, southeastern China, and is the country's eighth-largest beer producer by revenue.

It was one of the few regional heavyweight brewers in China that hadn't already been snapped up, and the competition to buy it illustrates the intense interest by foreign brewers in expanding in China, the world's largest beer market by volume.

Anheuser Busch owns the Budweiser business in Wuhan; 27% of Tsingtao Brewery Co., the leading brewer in China; and all of Harbin Brewery Group, the No.4 brewer in China in terms of sales. Anheuser last year won a tussle with SABMiller, the world's second-largest brewer by volume, to acquire Harbin Brewery for almost US$700 million.

Analysts said that compared with the Harbin Brewery acquisition, the $750 million price tag for Sedrin, even if for the whole company, is too high.

"Sedrin's just the eighth-largest brewer in China by sales volume, with 7.3 million hectoliters of sales," said Alice Hui, an analyst at DBS Vickers Securities in Hong Kong. "Harbin had more than 11 million hectoliters in sales."

InBev has been active in China since 1984, when it began providing technical and brewing know-how to local companies. InBev says it is now the country's third-largest brewer, with production capacity of more than 30 million hectoliters and a market share of around 10%.

Among other tie-ups in China, red-chip conglomerate China Resources Enterprise Ltd. has a joint venture with London-based SABMiller PLC called China Resources Snow Breweries.

Asia Pacific Breweries Ltd., Heineken's Singapore-based joint venture with Fraser & Neave Ltd., operates 16 breweries in Singapore, Malaysia, Thailand, Vietnam, Cambodia, China, New Zealand and Papua New Guinea.

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