Bloomberg News

Carlsberg Looks for Acquisitions in Asia as Europe Stagnates

February 21, 2012

(Updates Kingway’s share price in sixth paragraph.)

Feb. 14 (Bloomberg) -- Carlsberg A/S, the world’s fourth- biggest brewer, is seeking acquisition opportunities in Asia, including China, amid slowing growth in Europe.

“We look very actively across Asia,” Chief Executive Officer Joergen Buhl Rasmussen said in an interview in Beijing yesterday. In Europe, “we are assuming a cautious environment, very little growth, probably slight decline,” he said. Beer is “not completely recession proof.”

The beermaker wants to boost investment in China both organically and through acquisitions, Rasmussen said, without disclosing possible targets. The Copenhagen-based company last year increased ownership of its Indian unit, and expanded a partnership with Chongqing Brewery Co. in western China.

Brewers are looking to emerging economies to drive sales growth as markets in western Europe and the U.S. stagnate, restrained by already-high levels of alcohol consumption, growing competition and tough economic conditions.

Anheuser-Busch InBev NV, Tsingtao Brewery Co. and China Resources Snow Brewery Co., a joint venture with SABMiller Plc, may bid for assets of China’s Kingway Brewery Holdings, the Wall Street Journal said last week, citing people familiar with the matter. Rasmussen declined to comment on the report.

Possible Sale

Kingway rose as much as 15 percent to HK$3.06, the highest intraday level since August 2007, before trading at HK$2.99 as of the midday trading break in Hong Kong. Today’s climb boosts its gain this year to 37 percent, beating the 13 percent advance of the benchmark Hang Seng Index.

The Hong Kong-based company plans to start talks with “independent third parties” for the possible sale of its brewery business and assets, it said last month.

“People are thinking Carlsberg may come in and may want to pay a premium for it,” Jason Yuan, an analyst at UOB Kay Hian in Shanghai who has a “hold” rating on rival Tsingtao, said in by phone today. “They’ve been wanting to sell.”

Kingway Company Secretary Vanessa Wong said she’s unaware of reasons for today’s share surge and declined to comment on any possible deals. China Resources Enterprise Ltd. was unchanged at HK$27.80 and Tsingtao gained 0.6 percent to HK$40.75 in Hong Kong trading.

China’s beer market will grow 6 percent to 7 percent annually over the next two to three years, said Rasmussen, who’s in Beijing to attend the European Union-China summit starting today. Retail beer sales in China, the world’s most populous nation, may have risen to 360 billion yuan ($57 billion) in 2011, according to researcher Euromonitor International.

China Competitors

China Resources Enterprise, the maker of Snow beer with SABMiller, has a 22 percent share of China’s beer market; Tsingtao, part-owned by Asahi Group Holdings Ltd., has 14 percent; and Anheuser-Busch InBev has 12 percent, according to London-based Euromonitor.

Carlsberg, the largest shareholder in Chongqing Brewery with about a 30 percent stake, sells Kronenbourg 1664 and Wusu among other beers in China. It has 1.5 percent of the country’s market, according to Euromonitor.

Carlsberg reduced its annual forecast in August after bad weather and sluggish sales in Russia, where it owns the biggest brewer, along with headwinds from high prices of commodities including malting barley, weighed on profitability. It got almost half its operating profit from eastern Europe in its last fiscal year.

The volume of beer sold in eastern Europe slid 9 percent in the three months ended Sept. 30, the brewer said in November, compared with an 11 percent increase in Asia.

--Michael Wei and Clementine Fletcher, with assistance from Stephen Engle and Christine Hah in Beijing, Stephanie Wong in Shanghai and Paul Jarvis in London. Editors: Stephanie Wong, Frank Longid

To contact Bloomberg News staff for this story: Michael Wei in Shanghai at mwei13@bloomberg.net; Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net


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