Dutch brewer Heineken NV is buying a US$3.1 billion stake in China’s largest beer maker that will allow it to expand in a lager market that is dominated by local brands.
The Amsterdam-based company, which is making a global push into emerging beer markets, is to pay HK$24.4 billion for a 40 percent stake in the parent of China Resources Beer Holdings Co (華潤啤酒控股), maker of China’s best-selling Snow beer brand.
The deal will help Heineken gain a tighter foothold in a crowded field by leveraging China Resources Beer’s extensive distribution network, while also sharing in the returns of China’s beer market leader.
Photo: Reuters
China is now the second-largest premium beer market globally and is forecast to be the biggest contributor to premium volume growth in the next five years, Heineken said in its statement yesterday.
Heineken is paying an implied price of HK$36.31 a share of the listed entity, a 2.4 percent premium over its closing price on Thursday.
Under the deal, Heineken’s operations in China will be combined with those of China Resources Beer, and the Dutch brewer will license its brand to the Chinese partner on a long-term basis, according to company statements.
China Resources Beer’s parent company will acquire Heineken shares worth about 464 million euros (US$538 million).
Heineken will also make its global distribution channels available to China Resources’ brands, including Snow, according to the statement.
“It’s impossible that Heineken can grab a significant larger market share in China by itself,” Guotai Junan Securities Co (國泰君安證券) analyst Barney Wu (吳宇揚) said. “It has missed the chance as other international rivals such as AB InBev have become strong market leaders in the market.”
China has proved to be a difficult environment for some foreign operators in recent years. Asahi Group Holdings Ltd exited after selling its minority stake in Tsingtao Brewery Co (青島啤酒) and another in a Chinese beverage joint venture last year as it focused on acquisitions in Europe.
Heineken’s overseas expansion, namely in Brazil, has squeezed its profits.
The market is dominated by local companies, with three Chinese brewers accounting for more than half of total volume, according to Euromonitor International.
While China Resources dominates with a 26 percent share, Heineken’s brand commands less than 1 percent of the market.
“I’m surprised China Resources is willing to sacrifice so much of its shares to get Heineken,” Wu said.
“It shows the market leader in China is quite concerned that its growth potential is largely restricted compared with its competitor AB InBev, as the market is on the track of premiumization,” Wu added.
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