HONG KONG • China Resources Beer (Holdings) Co is in talks to acquire Heineken's China business in a deal that could be worth more than US$1 billion (S$1.3 billion) as the country's largest brewer seeks new growth from premium brands, said five people close to the discussions.
The negotiations come as global beer giants like Heineken, AB InBev and Carlsberg face stiff competition from local rivals and each other in emerging markets, which have been touted as the growth engine for the world's biggest brewers. China is the world's largest beer market by volume.
CR Beer's biggest brand, Snow, is the world's top-selling beer, but is almost exclusively sold in China.
One of the sources said the deal between CR Beer and Heineken would most likely include three breweries - in Guangdong, Hainan and Zhejiang provinces - Heineken's distribution operation and its brands in China.
The two brewers have discussed a share swap as part of the transaction, sources said. Details have not been finalised and talks could yet fall apart. They declined to be identified as the information is not public.
Shares of CR Beer jumped by as much as 14.4 per cent yesterday in Hong Kong to an all-time high of HK$35.30, following the Reuters report published after Thursday's market close.
"The (CR Beer) stock move is driven by the news about the company's interest in Heineken's China business. China Resources already owns the top beer brand in China, but it's a very local brand," said Mr Steven Leung, a Hong Kong-based director at brokerage UOB Kay Hian.
"With the acquisition of the Heineken business, the image of the company as a whole will improve, as China is upgrading its consumption quality," he said.
"The sustainability of the rally in the stock will depend on what price they pay for the Heineken business."
Heineken, which entered China in 1983, has struggled to set up a strong distribution network and to make a mark with its flagship Heineken lager, which lags far behind AB InBev's Budweiser in the premium market, industry analysts say.
The Dutch brewer had a 0.5 per cent share of the China market by volume in 2016, according to research firm Euromonitor International, while CR Beer accounted for more than a quarter.
Heineken sells its premium lagers Heineken, Tiger and Sol in China, along with cheaper local brands Anchor and Hainan Beer.
Beer sales volume in China has been declining since 2013 and is forecast to continue to fall, according to Euromonitor. Sales of higher-margin premium beers, however, have been growing at a double-digit rate each year during the same period.