Harbin: resist SABMiller's offer

Related tags Sabmiller People's republic of china Beer

Harbin, the leading Chinese brewery, has advised shareholders to
resist SABMiller's takeover bid for the company. The bid was
influenced by Ancheuser-Busch's 29 per cent acquisition of the
company earlier in the week. SABMiller now awaits a response from
shareholders, writes Danny Vincent

SABMiller said that is it to send letters to shareholders regarding the proposal and in 28 days the company will know if the take over bid is successful. But it has been reported today that the Chinese group is encouraging its shareholders to reject the company's offer.

SABMiller said it has always been keen to increase its stake in Harbin, but it appears that A-B's surprise acquisition accelerated the company's plans to do so.

"We are always looking to increase our stake in Harbin Brewery so this is a natural extension of that strategy,"​ the group's finance director for Asia and Africa, Jonathan Kirby told Reuters.

SABMiller argued that if it was to take over the company, the move would be beneficial to Harbin and in turn the Chinese industry.

Nevertheless, today Harbin described SABMiller's proposal as "an unduly hasty response"​ to the group's termination of the strategic investors alliance with the UK company earlier in the year.

It is not clear what the outcome of the proposal will be at this stage but the move has led commentators to predict that SABMiller's announcement may set a bidding war for the company in motion.

According to a Datamonitor analyst, SABMiller has so far been outwitted by A-B, and the group will need this investment to gain a stronger hold on the Chinese market.

"For SABMiller, it is absolutely essential to secure Harbin's ownership. While the potential of the Chinese beer market is enormous, opportunities to form alliances with established beer brewers in this market are scarce. SABMiller cannot afford to miss out on Harbin",​ the observer said.

Spectators claim that A-B may be interested in making a similar bid for the Chinese group.

It has been reported that A-B's Chinese partner company, Tsingtao, supported the group's 29 per cent acquisition, despite some speculation earlier in the week that the Chinese group disagreed with the move. It has been suggested that a joint bid from these two companies may well be on the cards. Such a prospect may be interesting to Harbin considering the group's position in the Chinese market.

Likewise, SABMiller's bid, supported by its Chinese partner company, Chinese Resources Brewery (CRB), could provide Harbin with a similar opportunity.

"Both beer groups are trying to cement their position in what is potentially one of the world's largest beer markets", Datamonitor added.

The Chinese beer market has a clear potential for western investors. The north east sector in particularly is experiencing strong growth and Harbin, the producer of many successful local brands in this region, is responsible for 30 per cent of all beer consumed in China.

The average income from a consumer in the north east of China is lower than the rest of the nation, but it is this sector which is driving growth, and local non-premium beer consumption is growing steadily.

If Harbin is to accept a bid from SABMiller or A-B, (that is if the latter company follows speculation and makes an offer) it would leave the successful company as the market leader in the region at a time when both the US and European market are slowing down.

But at the moment it appears to be SABMiller that is playing catch up. If Harbin rejects the take over offer the company's position in China will suffer.

"Failing to acquire the Chinese brewer would be a major setback in its quest to develop a stronghold in the Chinese market and it is doubtful whether the company's position in China would ever recover from this missed opportunity​, Datamonitor concluded.

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