LONDON/HONG KONG (BLOOMBERG) - Carlsberg, the Danish beermaker, is weighing the purchase of a 20 per cent stake in China's Tsingtao Brewery Co, people familiar with the matter said.
The Copenhagen-based company is working with an adviser on a potential bid for the Tsingtao stake being sold by Asahi Group Holdings, said the people. No final decision has been made, according to the people. The shares are worth about US$1.2 billion (S$1.7 billion) based on Wednesday's close in Hong Kong, data compiled by Bloomberg show.
Tsingtao shares rose 4.1 per cent to HK$35.50, the highest level in more than a year, at 10:43am on Thursday in Hong Kong. The city's benchmark Hang Seng Index rose 0.5 per cent.
Tying up with Carlsberg could help Tsingtao as it grapples with competition from China Resources Beer Holdings' best-selling Snow lager and Anheuser-Busch's Budweiser label. Carlsberg already owns about 60 per cent of rival Chinese beermaker Chongqing Brewery Co, in addition to selling its own brands in the country including Tuborg, Kronenbourg 1664 Blanc and its namesake pilsner.
"Tsingtao is fighting a battle on multiple fronts and they're overwhelmed," Jeremy Yeo, a Hong Kong-based analyst at Mizuho Securities Asia, said by phone Thursday. "The Carlsberg interest represents the best chance Tsingtao has had in ten years."
Asahi, the largest Japanese brewer, is exploring a potential sale of its minority Tsingtao holding, people with knowledge of the matter said last month. Asahi President Akiyoshi Koji said in a January interview the company will decide this year on options for its Tsingtao stake, as "ownership without control doesn't make much sense."
Representatives for Carlsberg and Asahi declined to comment.
Brewers are trying to capture China's higher-spending drinkers interested in premium labels as the country's consumption of the beverage has declined amid a slowing economy. The Chinese beer market has shrunk 6.2 per cent from 2013 to 2015, according to Euromonitor International data.
As the most high-end of the local brands, Tsingtao is in competition with foreign brewers like AB InBev, whose Budweiser label has the biggest market share of foreign brands - 3 per cent in 2015, the data show. Tsingtao, which has a 15 per cent share through three brands, trails Snow, which had 22 per cent of the China market in 2015, according to Euromonitor.
Carlsberg has also been pursuing a stake in Vietnam's Hanoi Beer Alcohol Beverage Corp as it seeks to boost its presence in faster-growing emerging markets. The Danish brewer may be trying to negotiate better terms than Asahi and could seek a Tsingtao board seat or specific distribution targets, according to Mizuho's Yeo.
"For Tsingtao, there may be incentive to help Carlsberg more than Asahi," he said. "Asahi's presence in China was very limited, whereas Carlsberg has a strong presence in the western region with Chongqing Beer, so there could be more tie-ups."