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Asahi aims to sell Tsingtao Brewery stake, go solo in China

Investors welcome move, shares rise in Tokyo and Hong Kong

China boasts the world's largest beer market, but sales have chilled since 2013.   © Reuters

TOKYO -- Asahi Group Holdings looks to sell its nearly 20% stake in Tsingtao Brewery in what would be the Japanese brewer's latest divestiture in China as resources are directed toward expansion in Europe.

China's beer market has expanded with the nation's economy to become the world's largest, but sales have retreated since their 2013 peak amid an austerity push by President Xi Jinping and declining consumption by younger individuals. Yet upmarket Japanese-brand beers enjoy growing demand in China, and Asahi intends to cultivate China on its own.

On Friday morning, investors responded positively to the news. Asahi Group Holding shares hit all-time high of 5,004 yen, up nearly 2% from Thursday's close, in Tokyo early morning trading. In Hong Kong, Tsingtao rose 6% to 33.3 Hong Kong dollars in early trade.

Asahi formed its first partnership with Tsingtao, China's No. 2 brewery, in 1997 by establishing a joint venture to produce the Tokyo-based company's mainstay Super Dry brand and Tsingtao's popular beer. In 2009, Asahi acquired a nearly 20% stake in Tsingtao for about 60 billion yen ($533 million at current rates) from the world's largest brewer, Anheuser-Busch InBev.

The Japanese company sought a foothold in China through its capital tie-up with Tsingtao. The brewer considered using Tsingtao's sales network to tap into the Chinese market. But tensions over the Senkaku Islands, which Japan administers but China claims as the Diaoyu, soured the countries' relations and Asahi's plans.

It is unclear whether two joint production companies in the Guangdong Province hub of Shenzhen and the Shandong Province city of Yantai also will be sold. Plans for the potential sale, announced Thursday, did not spell out terms of the deal.

Tsingtao Brewery issued a statement Thursday night saying that the company "will continue to monitor the development ... and make timely disclosures of information in coordination with Asahi Group and its related parties."

At the end of June, Asahi also announced plans to sell its entire stake in Chinese joint venture Tingyi-Asahi Beverages Holding, whose earnings are reflected on the Japanese company's books. The shares will be sold to Tingyi Holding, Asahi's local partner and China's top instant noodle maker, for about 70 billion yen.

Asahi has poured out roughly 1.2 trillion yen to acquire several brands from Anheuser-Busch InBev in western and eastern Europe. Seeing the region as a growth market, the Japanese brewer has indicated plans to review its asset portfolio.

Japanese rival Kirin Holdings also operates a factory in Guangdong. The company's Chinese sales volume rose 10% in 2016 with its mainstay Ichiban beer gaining popularity as a pricier brand.


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