Asahi Group agreed to place its stake in Tsingtao Brewery back into Chinese hands, selling its holding to conglomerate Fosun Group and the local brewer for about $941 million.
Asahi is selling its 20 per cent holding in China’s third-largest brewer for HK$27.22 a share, the Japanese company said in a statement Wednesday. That’s a 32 per cent discount to today’s closing price of HK$40 a share. Fosun will pay about $847 million for an 18 percent stake while Tsingtao will pay approximately $94 million for the rest.
Fosun has been centering its investment portfolio around what it calls “wealth, health, happiness” industries that provide goods and services for Chinese middle-class families. The Tsingtao deal marks the biggest investment in food and beverage for Fosun, after being at the center of a government crackdown on offshore acquisitions that sought to reduce leverage and risk in the country’s financial system.
“Fosun would want to buy it because the company is buying back a time-honored Chinese brand back from the Japanese, and it is buying real, tangible assets that give it stable cash flow,” said Shaun Rein, managing director of Shanghai-based China Market Research Group. “This is something that the Chinese government is going to like.”
A Fosun-led Chinese consortium agreed to buy French margarine maker St Hubert in July for about $732 million. In addition, Fosun also owns Israel’s skin-care brand Ahava, and Greek fashion brand Folli Follie.
The purchase will give Fosun a presence in a market where increasingly wealthy Chinese drinkers are looking to switch to premium labels. Despite being the country’s third-biggest brewer, Tsingtao faces challenges in its home market. It is in the higher-quality category of local beers, but has struggled to position itself as foreign brewers such as Anheuser-Busch InBev and Diageo Plc have been gaining ground.
The deal is expected to close at the end of March, Asahi said in the statement. Asahi expects to book about a 6.3 billion yen profit ($56 million) from the sale in the first quarter of fiscal year 2018, company spokesman Takuo Soga said. Asahi purchased its Tsingtao stake for $667 million in 2009 from AB InBev.
Expectations for a deal have buoyed Tsingtao shares, sending them up 26 per cent in Hong Kong this month. Tsingtao shares gained 3.9 percent in Hong Kong Wednesday before the announcement, while Asahi dropped 0.9 percent in Tokyo. Asahi was reported to be considering a sale of its 20 percent holding in January, and Danish brewer Carlsberg A/S emerged as a possible buyer in February. Asahi confirmed in October it had hired Morgan Stanley to advise on a sale.
Asahi’s investment in the Chinese company hasn’t quite delivered for the Japanese brewer. After eight years, Tsingtao Brewery still didn’t make or sell at large-scale Asahi’s top-selling “Super Dry” brand. Asahi President Akiyoshi Koji said in a January interview that “ownership without control doesn’t make much sense.”
Asahi is selling its stake as it expands in Europe, where it acquired about $11 billion in beer brands from Anheuser-Busch and SAB Miller. The Japanese brewer has said it will ramp up sales of its Super Dry beer in Europe as demand wanes at home in Japan.