Carlsberg bids $466m to take control off China’s Chongqing Brewery Company


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Carlsberg launched international premium brand Tuborg onto the Chinese market in April 2012
Carlsberg launched international premium brand Tuborg onto the Chinese market in April 2012
Carlsberg says it is taking an ‘important step forward’ in China with a $466m offer for a controlling stake in Chongqing Brewery Company (CBC), in a move to double the number of native breweries it directly controls.

The group revealed the news of the partial takeover offer (PTO) yesterday, for a further 30.29% share in Chongqing at an offer price of RMB 20/share ($3.2), for an EV/EBITDA multiple of 15.7x, to add to its existing 29.7% holding.

As reported last Friday, in an article by guest columnist, head of Aktiefokus China, Jacob de Lichtenberg​, trading in CBC shares was suspended last Monday, as Carlsberg revealed plans to up its stake.

Control of CBC (12 breweries in Chongqing Municipality) would significantly boost Carlsberg’s footprint in China; the Danish brewer has controlling stakes in 13 breweries there, and minority stakes in a further 17, where this number includes CBC’s assets.

Large-scale beer business

Carlsberg is already the largest shareholder in Chongqing, and Jørgen Buhl Rasmussen, Carlsberg president and CEO, said: Our Asian business is very important for our long-term growth strategy and we are very pleased that we now can take this important step forward in China.

He added: “We have had a very good relationship with CBC and its main shareholder since 2008 and we believe that through closer co-operation with Carlsberg, the performance of this large-scale beer business will be significantly enhanced.”

As the controlling shareholder in CBC, Carlsberg said it would assume direct management of the company, drive greater synergies and leverage its expanded production footprint across several new provinces in China.

In 2012 Carlsberg said its price/mix in China grew circa. 10%, driven by prices increases and strong growth of its international premium brands (Tuborg was launched in China last April) and premiumisation efforts related to local power brands.

Carlsberg said that best practice systems would also build CBC’s market position, as would revised processes in key areas of production/procurement, sales and marketing and finance.

Big beer fights for Chinese assets

De Lichtenberg said last Friday that Carlsberg’s move reflected a growing fight among global brewers for Chinese production assets, coming hot on the heels of SAB Miller’s Chinese JV Snow Breweries recent acquisition of Kingway Brewery in Guangdong.

Canadean estimates global beer volume growth from 2012 to 2017 at around 230m hl (+12%), with Asia expected to account for 140m hl and China accounting for the bulk of this figure, contributing 45% of world growth.

Aktiefokus research shows that CBC and its subsidiaries have an annual production capacity of 24-25m hectoliters (hl), and is market leader in Chongqing Municipality with an estimated market share of around 80%; Carlsberg estimates in its 2012 Annual Report that is has a 50-55% market share in Western China, including Chongqing 

Through a separate agreement, Chongqing Beer Group (CBC’s second-largest shareholder) has agreed to tender its 20% stake in Carlsberg as part of the tender offer process at the same RMB 20/share price.

If the partial takeover offer (for the 30.29% stake) is oversubscribed, Carlsberg said it had agreed to buy the balance of shares owned by Chongqing Beer Group after completion of the PTO.

Carlsberg said the transaction would be earnings-per-share (EPS) accretive in the first year following completion, but added that sealing the deal may take up to 12 months due to regulatory approvals.

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