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E-Malt.com News article: 1952

China: Australian brewing force, Lion Nathan, has acquired the Changzhou Hua Xia Brewing Co. Limited (Hua Xia), which is located in the City of Changzhou in South Jiangsu province, China, around 90 kilometres from Lion Nathan’s Wuxi brewery, according to Lion Nathan report from December, 17. Hua Xia brews around 22 million litres of beer and five million litres of rice wine annually which it sells in and around the City of Changzhou (population 900,000). Lion Nathan has a small, but growing business in the area and competes directly with Hua Xia in that market.

The total purchase price for the equity in the business is RMB17 million. In addition Lion Nathan will assume working capital and other liabilities of RMB65 million. Lion Nathan has also sold the land on which the existing brewery is located with payment being received progressively over the next two years. Lion Nathan’s net investment in this business will peak at around RMB50 million (A$8.3 million) in 2004 and then progressively reduce to RMB15 million (A$2.5 million) as the proceeds for the sale of the property are collected. The acquisition is expected to be earnings (NPAT) neutral in the 2004 fiscal year and earnings accretive and value enhancing in the 2005 financial year.

Commenting on the acquisition Lion Nathan CEO Gordon Cairns said: “This acquisition represents a low cost opportunity for us to strengthen our competitive position in the Yangtze River Delta. It is also consistent with our strategy of achieving profitability by growing mainstream beer volume and share in the Delta by expanding out from our core markets around our Wuxi and Suzhou breweries. The acquisition is particularly important in two respects. Firstly it provides us with a local presence in the Changzhou region which will help us grow our business in that market more quickly than we would otherwise been able to do. Secondly, it makes it more difficult for competitors, who might be interested in acquiring Hua Xia, to compete with us in our local markets, particularly in and around Wuxi where we are the market leader.”

In a separate transaction Lion Nathan has also acquired the remaining 10 % of its Wuxi brewery thereby securing full ownership and control.


19 December, 2003

   
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