Beijing Yanjing Brewery Co., China's third-largest brewer, said it's spurning approaches from the world's 10 biggest beermakers, including Anheuser-Busch Cos. and SABMiller Plc.
China's biggest brewer without an overseas partner said it prefers to acquire rather than be acquired. It's planning to spend 2 billion yuan ($241 million) in six years to buy other breweries and increase capacity by two-thirds to 5 million tons. Yanjing is the official beer served at state banquets honoring foreign leaders and other dignitaries.
"We want to be the last bastion of the Chinese-owned beer industry," Fu Chunfeng, head of Yanjing's acquisitions desk, said in a telephone interview from Beijing. "We have a good brand, and we don't lack money."
Anheuser-Busch, SABMiller and other overseas brewers facing stagnating home markets have been jostling to expand in China, where beer sales are growing. Anheuser-Busch last week outbid SABMiller in a takeover battle for Harbin Brewery Co., valuing China's fourth-biggest brewer at $757 million.
That was 70 percent more than Anheuser-Busch paid for a stake last year in Tsingtao Brewery Co., China's largest brewer, based on price versus gallons of beer sold.
The world's top five brewers have stakes in Chinese companies. Anheuser-Busch, the world's biggest brewer, is allied with two of China's top four brewers. Its nearest rival SABMiller has 49 percent of China Resources Breweries, China's second-largest brewer. No. 3 Heineken NV bought a stake in a Guangdong Brewery Holdings Ltd. in southern China in January. Also operating with Chinese partners are Interbrew SA, the world's fourth-largest brewer, and No. 5 Carlsberg A/S.
"It's just wishful thinking on Yanjing's part to want to stay China-owned," said Yao Maogong, chief trader at Shanghai Securities Co." Foreign breweries are much wealthier, more experienced in marketing their product than Yanjing is. It's just a matter of time before Yanjing caves in and takes on a foreign partner."
Yanjing is a unit of Beijing Enterprise Holdings Ltd., the Hong Kong-listed investment arm of the city government. Fu said the company wants to expand into coastal provinces such as Guangdong and Jiangsu, which are among the wealthiest in China. He didn't identify any acquisition targets and declined to discuss valuations in the industry after the first overseas battle for a Chinese brewer ended.
Yanjing, which had 878 million yuan of cash at the end of 2003, has been on a buying spree in a nation where mergers and acquisitions are stitching together what was once a fragmented industry of small, inefficient brewers. Yanjing averages 380 million yuan of profit from operations every year, Fu said.
"It takes more than just money to compete with foreign breweries," said Shanghai Securities' Yao. " Besides, Yanjing will find it even harder to compete in the domestic beer market against the likes of Tsingtao now that these Chinese breweries are backed by foreign brewers."
Last year, Yanjing bought control of rival Huiqian Brewery Group Inc. from the government of the southeastern province of Fujian for 362.4 million yuan. Yanjing said it acquired a 38.2 percent stake in Huiquan to become the biggest shareholder.
In December 2002, Yanjing agreed to pay 108 million yuan to raise its stake in a southwestern China brewing plant to 68 percent from 38.4 percent by buying 8.44 million shares from shareholders of Yanjing Brewery (Guilin Liquan) Co. for 21.5 million yuan.
Yanjing's Class A shares fell 1.6 percent to 11.38 yuan China's Shenzhen Stock Exchange at 2 p.m. The shares have risen 37 percent the past 12 months, compared with a 9 percent drop in the Shenzhen A-share Index.
Beer sales in China rose 6.3 percent by volume in 2002, compared with 1.3 percent in the U.S. and 2.6 percent in Europe, according to Canadean Ltd., a beverage-research company in Basingstoke, England. China's beer market will expand as much as 5 percent a year until 2008, compared with growth of 0.7 percent for the U.S. and 2.5 percent for Europe through 2005, Canadean said.
Chinese consumption averages 19 liters a person, a figure beermakers forecast will rise along with incomes in China, the fastest-growing of the world's top 10 economies. Chinese consumption is about half the South Korean average and about a third of what Australians quaff.