China Resources Beer gains SABMiller stake in China Snow at bargain price

By Donny Kwok

HONG KONG (Reuters) - China Resources Beer will pay $1.6 billion to buy out SABMiller Plc's (L:SAB) stake in their China Resources Snow Breweries venture, a much lower price than expected and sending shares in the state-backed firm soaring by a quarter in value.

The deal which gives China Resources Beer (Holdings) Co Ltd (HK:0291) full control of Snow, the world's No. 1-selling beer by volume, is part of a series of divestments taking place to gain regulatory approval for Anheuser-Busch InBev (BR:ABI) $100 billion-plus takeover of rival SABMiller.

The sale of the 49 percent stake may help the group gain regulatory approval from Beijing.

Jeremy Yeo, an analyst at Mizuho Securities Asia said the price tag was significantly below the $3 billion to $3.5 billion he had expected.

"This news, in itself is positive for CR Beer's shareholders, from the standpoint of better-than-expected potential near-term EPS accretion," he wrote in a note to clients.

The Snow deal, which would make China Resources the largest brewer in the country with a 30 percent market share, is contingent on the AB InBev-SAB Miller deal going ahead. It is set to be settled in cash using a combination of funding options including debt and/or equity financing, China Resources Beer said in a statement.

Shares in China Resources Beer jumped 25 percent to their highest level in five years, regaining ground lost so far this year after the stock was dropped from the main constituents in the Hang Seng Index following a regular review by the index compiler.

Steven Leung, a sales director at UOB Kay Hian in Hong Kong, said the deal came earlier than the market had expected.

"The deal will definitely bring in some positive impact to the company, both in enhancing its market share and prospects in the local beer industry," Leung said.

China Resources accounted for 23.3 percent of the beer market in China in 2014, while Tsingtao Brewery <600600.SS> (HK:0168) ranked second at 18.4 percent, according to data from Euromonitor.

China Resources Beer changed its name from China Resources Enterprise after it announced a plan last April to sell all its non-beer assets to controlling shareholder China Resources (Holdings) Co for $3.6 billion.

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China Resources Snow Breweries had a net asset value of HK$27.2 billion ($3.5 billion) at the end of last year, the statement said. Its net profit fell 21 percent to HK$1.51 billion in 2014 from a year earlier.