| Mon 30 Jun 2003, 9:09 | | SABMiller makes strategic investment in Harbin Bre |
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SABMiller makes strategic investment in Harbin Brewery Group
SABMiller Plc
JSE ALPHA CODE : SAB
ISSUER CODE SOSAB
ISIN CODE GB0004835483
SABMiller makes strategic investment in Harbin Brewery Group
Deal consolidates SABMiller status as the leading international brewer in China
London and Johannesburg, 29 June, 2003 - SABMiller plc ("SABMiller") and Harbin
Brewery Group Limited ("Harbin") today announce SABMiller"s acquisition of a
29.6% stake in Harbin from its largest shareholder, China Enterprise Development
Fund ("CEDF"), for HK$675 million (approximately US$87 million) in cash. The
transaction is subject to certain conditions precedent.
In addition SABMiller and Harbin will sign a Strategic Investor Agreement
("SIA"), the terms of which will, inter alia, allow SABMiller to appoint not
less than two directors to the eleven member board, and provide the framework
for the sharing of best practices and the transfer of relevant expertise. Under
this agreement SABMiller and Harbin will explore possibilities for co-operation
in areas such as sales, distribution and procurement.
The transaction will be effected by the creation of a new subsidiary of
SABMiller, Gardwell Limited ("Gardwell"), which will buy the CEDF shareholding.
Certain members of the existing Harbin management team will acquire a 5% stake
in Gardwell ensuring their continued contribution to the successful working of
the alliance. The transaction is expected to be earnings enhancing for
SABMiller in the first full year.
This strategic investment further consolidates SABMiller"s position as the
leading international brewer in China, a market the Company entered in 1994
through its joint venture China Resources Breweries ("CRB"). Harbin is China"s
fourth largest brewer and is focused on the North-Eastern Chinese market where
SABMiller already has significant interests.
The majority of Harbin"s volumes are accounted for by the Harbin brand umbrella
which is largely focused on the fast growing and profitable upper mainstream and
premium market segments. The Harbin brand is the oldest beer brand in China.
Following the acquisition of three breweries in 2002 Harbin now has proforma
sales volumes of approximately 10.4 million hectolitres which represents a
compound annual volume growth rate of approximately 34% since 1996. For the
year ended 31 December 2002 Harbin recorded sales of HK$1,119 million (US$144
million) and pre-tax profit of HK$160 million (US$21 million).
Harbin was listed on the Hong Kong Stock Exchange in June 2002. Aside from the
CEDF stake, 30% of Harbin"s equity is held by the Municipal Government of Harbin
and 34.6% is in the hands of the public.
Graham Mackay, Chief Executive of SABMiller said: "We are delighted to have made
this strategic investment in Harbin, one of the most successful and profitable
brewers in the Chinese market. The transaction represents a further step in
SABMiller"s strategy in China of focusing on local brands to build regional
leadership, and strengthens our position in the world"s largest beer market.
Whilst this transaction has, unusually, been made outside of CRB, we remain
committed to that joint venture and have received their full support for this
transaction" .
Peter Lo, Chief Executive of Harbin Brewery stated, "We are very pleased to be
partnering with one of the world"s leading brewing groups which has the ability
to bring significant value to Harbin. Its brands, expertise, and experience in
developing countries are all extremely valuable to us."
Ning Gao Ning, Chairman of China Resources Enterprise Limited and non-executive
director of SABMiller, praises the acquisition , "I believe that, with SABMiller
as a significant shareholder in both CRB and Harbin, there is potential for an
improvement in the operating environment in the North Eastern part of China,
which should ultimately lead to improvements in profitability. I look forward
to future co-operation between the two companies."
Further details, including a map of SABMiller"s and Harbin"s operations in
China, may be found on SABMiller"s website: www.sabmiller.com
JPMorgan and Cazenove acted as joint financial advisors to SABMiller.
