The battle for China's Harbin Brewery is over.
SABMiller, partly owned by Altria Group
Last month, Anheuser-Busch paid $139 million for a 29% stake in Harbin, China's fourth-largest brewer. In response, SABMiller -- which already owned 29% of the brewer -- launched an unsolicited $553 million offer for the company. Anheuser-Busch fired back, closing a series of deals that bumped its stake above 37%, which in turn forced a mandatory takeover bid under Hong Kong securities laws, culminating in a $717 million bid.
SABMiller decided Thursday that things had gone far enough. Though it had planned to combine Harbin's operations with those of a second regional brewer of which it owns a 49% stake -- China Resources Breweries -- SABMiller concluded that Harbin was not an "essential asset at any price." (Really? Not even for $553 million?)
Some, not least of which SABMiller, thought Anheuser-Busch's bid might have been a bit on the high side at around 35 times Harbin's forecasted 2004 earnings. That, compounded with a recommendation by Harbin's board of directors to reject SABMiller's offer and accept Anheuser-Busch's bid, made SABMiller's decision to back away a cinch.
For all that, the attraction between Anheuser-Busch and Harbin is understandable. China is the world's largest beer market and growing at a 5%-6% annual clip. In addition, Anheuser-Busch already owns a 10% stake in Tsingtao Brewery, which it plans to increase to 27% over the next few years. With Anheuser-Busch's success in establishing its Budweiser and Bud Ice on the mainland, Harbin hopes the partnership will help it expand its own brands beyond its regional roots.
On the surface, SABMiller hardly looks the loser after selling its Harbin stake to Anheuser-Busch for $211 million -- a significant premium to its own purchase price. But sometimes you've got to pay up to get what you want. And, if I had to take sides, it's Anheuser-Busch and Harbin that look like winners.
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Fool contributor Jeff Hwang owns shares of Anheuser-Busch.