Asahi Group Holdings Ltd. agreed to place its stake in Tsingtao Brewery Co. back into Chinese hands, selling its holding to conglomerate Fosun Group and the local brewer for about $941 million.
Asahi is selling its 20 percent holding in China’s third-largest brewer for $27.22 Hong Kong dollars a share, the Japanese company said in a statement Wednesday. That’s a 32 percent discount to today’s closing price of HK$40 a share. Fosun will pay about $847 million for an 18 percent stake while Tsingtao will pay approximately $94 million for the rest.
Fosun has been centering its investment portfolio around what it calls “wealth, health, happiness” industries that provide goods and services for Chinese middle-class families. The Tsingtao deal marks the biggest investment in food and beverage for Fosun, after being at the center of a government crackdown on offshore acquisitions that sought to reduce leverage and risk in the country’s financial system.
“Fosun would want to buy it because the company is buying back a time-honored Chinese brand back from the Japanese, and it is buying real, tangible assets that give it stable cash flow,” said Shaun Rein, managing director of Shanghai-based China Market Research Group. “This is something that the Chinese government is going to like.”
A Fosun-led Chinese consortium agreed to buy French margarine maker St Hubert in July for about $732 million. In addition, Fosun owns Israel’s skin-care brand Ahava, and Greek fashion brand Folli Follie.
The purchase will give Fosun a presence in a market where increasingly wealthy Chinese drinkers are looking to switch to premium labels. Despite being the country’s third-biggest brewer, Tsingtao faces challenges in its home market. It is in the higher-quality category of local beers, but has struggled to position itself as foreign brewers such as Anheuser-Busch InBev and Diageo PLC have been gaining ground.
The deal is expected to close at the end of March, Asahi said in the statement. Asahi expects to book about a ¥6.3 billion profit ($56 million) from the sale in the first quarter of fiscal year 2018, company spokesman Takuo Soga said. Asahi purchased its Tsingtao stake for $667 million in 2009 from AB InBev.
Expectations for a deal have buoyed Tsingtao shares, sending them up 26 percent in Hong Kong this month.
Asahi was reported to be considering a sale of its 20 percent holding in January, and Danish brewer Carlsberg A/S emerged as a possible buyer in February. Asahi confirmed in October it had hired Morgan Stanley to advise on a sale.
Asahi’s investment in the Chinese company hasn’t quite delivered. After eight years, Tsingtao Brewery still didn’t make or sell at large-scale Asahi’s top-selling Super Dry brand. Asahi President Akiyoshi Koji said in a January interview that “ownership without control doesn’t make much sense.”
Asahi is selling its stake as it expands in Europe, where it acquired about $11 billion in beer brands from Anheuser-Busch and SAB Miller. The Japanese brewer has said it will ramp up sales of its Super Dry beer in Europe as demand wanes at home in Japan.