Global beer giant SABMiller Plc formally launched a US$550 million offer for Harbin Brewery Monday.

The world's second-largest brewer already owns 29.4 percent of Harbin Brewery and is offering to buy all of the remaining shares at HK$4.3 (US$0.55) a share in the Hong-Kong listed firm.

This includes buying a 29 percent stake in Harbin Brewery which was recently acquired by larger rival Anheuser-Busch.

The offer price represents a 65 percent premium to the average price of Harbin Brewery since it went public in June 2002, and is about 38 times of Harbin Brewery's 2003 earnings and more than four times the brewer's net asset value.

SABMiller, which is based in both London and Johannesburg, said yesterday that its offer was "a full and fair price," but the door remains open for a higher offer.

The company attaches great importance to the deal, which steps up its takeover battle with Anheuser-Busch.

Majority ownership of China's fourth-largest brewer would offer a strategic fit to its existing joint venture operation, China Resources Breweries (CRB), in Northeast China, SABMiller said in its 40-page offer document.

CRB and Harbin currently control between 60 and 65 percent of the Northeast China's beer market.

"We are the natural suitor for this business... we think shareholders will view this favorably," said Andre Parker, head of SABMiller's Africa and Asia operations.

Shares in Harbin Brewery were little changed on the news yesterday, ending at HK$4.975 (US$0.64). It has traded at more than the offer price since the plan was announced on May 5 on the anticipation that Anheuser-Busch will make a counter bid.

The company warned investors that Harbin shares "may fall below SABMiller's offer price in the event that the offer is not accepted."

But Harbin management have said they will reject the bid, preferring instead to team up with top US brewer Anheuser-Busch.

Harbin Brewery Chief Executive Peter Lo said his management is doing everything possible to derail SABMiller's attempts to gain control of the company.

The company's 10-month-old relationship with SABMiller has failed, he said.

And the foreign brewer had not turned the relationship between Harbin and CRB from a competitive one into a co-operative one, with respect to distribution channels.

Nor had it offered marketing or technological support, added Lo.

Earlier media reports said that the Harbin municipal government also prefers co-operation with the US brewer.

Foreign brewers have been scrambling to invest in China since 2002, as the country becomes the world's largest beer market in terms of volume.

But great potential for further market growth remains, as, on average, a Chinese person drinks just 10 litres of beer annually compared with about 50 liters in Japan and 84 liters in the United States.

Anheuser-Busch, the maker of Budweiser beer, triggered the battle for Harbin by striking a deal to buy approximately 29 percent of the firm for US$139 million, or HK$3.70 (US$0.47) a share earlier this month.

The company has announced the completion of its purchase last Wednesday through the purchase of investment holding company Global Conduit Holdings Ltd.

Global Conduit acquired the brewery shares from Harbin municipal government under a previous agreement in March, and the transfer to Anheuser-Busch was completed after receipt of all requisite approvals for the transaction.

The move prompted SABMiller to launch the cash offer.

SABMiller has hired Anglo-Chinese and ABN Amro as its financial advisers on this offer, which will close on June 21. Harbin Brewery has hired CLSA Ltd, the Asian investment banking unit of France's biggest bank, as its adviser.

(China Daily May 25, 2004)