Heineken has acquired a 40% stake in a Chinese brewery. The Dutch brewer said yesterday (31 March) that it has reached an agreement, through its associated company, Heineken-APB (China) Pte Ltd (HAPBC), with Nantong Alcohol Industry Co., Ltd to acquire the stake in Jiangsu DaFuHao Breweries Co, Ltd (DaFuHao).

The total acquisition is valued at €22.1m of which Heineken's share is 46.1%, or €10.2m. The transaction will be funded from existing cash resources, Heineken said. The investment is expected to be earnings accretive in 2005. The deal is subject to necessary consents as well as approvals of the relevant local authorities.

As a result of this transaction, Heineken said that HAPBC's market position is significantly strengthened in the adjacent provinces of Jiangsu and Shanghai.

In a statement, Thony Ruys, chairman of the executive board of Heineken said: "Jiangsu DaFuHao Breweries' profitability in a competitive market such as Jiangsu, is a testament to its strength. With a strong position in one of the key beer markets in China, the acquisition of DaFuHao is a further step in our long-term growth path in China. It is consistent with Heineken's strategy of focusing on acquiring interest in breweries with quality earnings stream. Furthermore, it's an excellent opportunity for the Heineken brand to benefit from DaFuHao's distribution network in the Nantong region for further growth."

DaFuHao, incorporated in 1996, is based in the city of Nantong, located in the Jiangsu Province, on China's southeast coast. DaFuHao owns four breweries with a total production capacity of 3.5m hectolitres in Nantong, Tongzhou, Qidong and Yancheng. It brews, markets and distributes major beer brands including 'BBOSS', Tongzhou and Changjiang, which are popular in Nantong. The flagship brand 'BBOSS' is also marketed and sold in other parts of the Jiangsu Province. The brewery has a 12% market share in the Jiangsu province and 60% market share in the 1.6m hectolitre Nantong region.

In 2003 DaFuHao sold a volume of 1.4m hectolitres and the turnover was €22m. The brewery employs approximately 1,200 staff.

The DaFuHao stake is HAPBC's second recent investment in China. In January 2004 it acquired a 21% interest in Kingway Brewery, which brews the Kingway beer in Guangdong province and is one of the most profitable listed brewers in China.

HAPBC also owns Shanghai Asia Pacific Brewery, where Heineken beer is brewed for the Chinese market and Hainan Asia Pacific Brewery.

HAPBC, in which Heineken has an indirect stake of 46.1% and Fraser & Neave 43.9%, combines all activities of Heineken and Asia Pacific Breweries in China.

HAPBC is a 50/50 joint venture between Asia Pacific Investment Pte Ltd (APIPL) and Asia Pacific Breweries Limited (APBL). APBL is controlled by its parent company APIPL, a joint venture, with equal shareholders' and boards' voting rights, between Heineken and Fraser & Neave.