China Resources Snow Breweries (CRS) has agreed to acquire a 100% equity interest in Zhejiang Yinyan Brewery for a cash consideration of US$42.3m. In addition, the SABMiller associate and subsidiary of China Resources Enterprise will acquire the brewing related assets of the Anhui Huaibei Xiangwang Brewery Company for $10.1m.

Situated in the Haiyan county of Zhejiang Province on the east coast of China, the Yinyan Brewery should extend CRS's footprint in northern Zhejiang, an area which is close to a number of major cities including Shanghai, Hangzhou, Suzhou and Ningbo. Similarly, Xiangwang Brewery is based in Huaibei, a major city in northern Anhui, CR Snow said.

Upon acquisition, CR Snow's national brand Snow will be produced as soon as practicable, a statement said.

At present, CR Snow has two breweries in Zhejiang Province and five breweries in Anhui Province, with 2005 sales volumes of 2.9m hectolitres and 4.9m hectolitres respectively.

Incorporating Yinyan's net debt of $6m and CR Snow's intention to invest an additional $1.8m, the total investment cost in Yinyan Brewery is expected to be approximately $50.2m.

The current annual production capacity of the brewery is 1.8m hectolitres and this will be increased to 2.4m hectolitres after undergoing the planned investment. At present, the portfolio is focused on the Yinyan series of beers, which are distributed in the Jiaxing area of Zhejiang; and in Shanghai. In 2005. Yinyan sold approximately 1m hectolitres of beer.

The consideration for the acquisition of Xiangwang is based on appraised asset value, with an intended further investment of $7.4m, bringing total investment cost to approximately $17.4m.

The annual production capacity of the brewery will be upgraded from 930,000 hectolitres to 1.6m hectolitres. At present, the brewery's main brand, Xiangwang, has a dominant market share in Huaibei and in 2005 the brewery reported sales volume of about 650,000 hectolitres.

André Parker, managing director of SABMiller Africa & Asia, said: "We have a profitable and growing presence in Zheijiang and Anhui. Therefore, these acquisitions will not only effectively reinforce CR Snow's market position in these provinces, but provide a larger platform to expand our national brand Snow in these strong growth areas."

Mark Chen, managing director of China Resources Enterprise, said: "The two acquisitions play a crucial role in the strategic development of CR Snow in these areas. Yinyan Brewery will generate synergies with our existing breweries at Qianjiang and Xiling, cementing a strong network in the northern region of Zhejiang Province. It will also provide us direct access to the Shanghai market given its proximity to the city. Whilst at the same time, acquisition of Xiangwang Brewery will establish CR Snow's production base in northern Anhui and add to our dominant market position in the province."