Chinese bid battle looms for SABMiller

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The Independent Online

The first takeover battle for a Chinese company between two international rivals is due to break out today when the London-based SABMiller launches an offer for Harbin Brewery, China's fourth biggest brewer.

SABMiller is expected to confirm that it is planning a takeover bid for Harbin worth about HK$3.7bn (£270m) and outflank Anheuser-Busch, its arch rival, in the process.

SABMiller and Anheuser have become locked in a battle for control of Harbin after the US maker of Budweiser said on Sunday that it had acquired a 29 per cent stake, rivalling the 29.4 per cent that SABMiller had acquired in the Chinese brewer last year. The remaining 41.6 per cent is quoted on the Hong Kong stock exchange.

The escalation of China's "beer wars" shows how important the market is to international brewers but could also be a harbinger of things to come as foreign companies in other sectors seek to stake a claim in China's fast growing economy.

SABMiller, led by Graham Mackay, the chief executive, won two places on Harbin's board and forged a strategic alliance with the Chinese brewer. However, Harbin is today expected to announce that the alliance with SABMiller is being terminated in favour of Anheuser. Harbin's shares were suspended on Monday at HK$3.22 pending an announcement from Harbin.

SABMiller is committed to its stake in Harbin and would be an extremely unwilling seller. It believes it can extract significant cost savings from Harbin by ultimately combining it with its other Chinese beer business, China Resources Breweries, in which it has 49 per cent.

Both businesses are significant players in the north-east of China. Given its greater synergy benefits, SABMiller is expected to be confident it can outbid Anheuser should the US brewer launch a counter-offer.

Another significant factor could be the price at which Anheuser and SABMiller bought their respective stakes in Harbin. Anheuser paid HK$3.70 a share while SABMiller paid only HK$2.29, giving it plenty of headroom should it come down to an auction for the company.