| Fri 7 May 2004, 10:27 | | Trouble brews as Harbin jilts SABMiller bid |
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Trouble brews as Harbin jilts SABMiller bid
May 7, 2004
By Wendy Lim
Hong Kong - Harbin Brewery favoured having Anheuser-Busch as its major shareholder because its partnership with SABMiller had failed, the Chinese brewer at the centre of a takeover battle between the world's two biggest beer makers said yesterday.
"We had hoped the [SABMiller] tie-up would boost our brand and improve technology and sales," Harbin chief executive Peter Lo said in an interview yesterday. "But in the past 10 months, nothing has happened."
Lo said Anheuser-Busch, which at the weekend declared it was matching SABMiller's stake by buying 29 percent of Harbin for HK$1.08 billion (R940 million), or HK$3.70 a share, was a better long-term partner.
London-based SABMiller this week launched a hostile $553 million (R3.8 billion), or HK$4.30 a share, bid for Harbin after the US brewer revealed its investment.
SABMiller, which bought its 29.4 percent stake in China's fourth-biggest brewery last year, has challenged Harbin's recommendation that shareholders should take no action on its bid.
"Harbin's management team needs to explain why they think our offer undervalues their business," SABMiller spokesperson Nigel Fairbrass said yesterday.
Investors are counting on a bidding war. Harbin stock, which leapt nearly 46 percent on Wednesday, gained a further 3.7 percent to HK$4.875 yesterday, about 30 times its forecast 2004 profits.
Lo said: "If you run a business in China, local management is important. Without the support of management and staff, how can SABMiller run Harbin, even if it holds a majority stake?"
Lo said conflicts of interest had emerged between SABMiller's holding in Harbin and its 49 percent stake in China Resources Breweries (CRB).
"This year we wanted to raise prices but they [CRB] wanted to take advantage and cut prices."
Harbin said it had terminated its strategic partnership with SABMiller; Anheuser-Busch would make a better partner.
"They [Anheuser-Busch] only have one plant but you can find Budweiser all over China. They are the only one building a nationwide network," Lo said.
He declined to say whether Harbin expected a counteroffer from Anheuser-Busch, which would not comment yesterday.
Anheuser-Busch holds nearly 10 percent of China's biggest beer maker, Tsingtao Brewery, a stake it will boost to 27 percent over the next few years. Tsingtao said yesterday it supported Anheuser-Busch's investment in its rival.
Although Harbin prefers Anheuser, SABMiller's bid could be lucrative for top Harbin officials, including Lo, who paid HK$5 million for 5 percent of the vehicle that bought the stake in Harbin on behalf of SABMiller.
The officials were granted put options, which require SABMiller to buy back the option shares for HK$55 million. If SABMiller made a general offer for Harbin, its payment to exercise the options could be doubled.
