Interbrew, the Belgian brewer, has continued its Chinese expansion with the acquisition of a 24% stake in Zhujiang Joint Stock Company for US$19.5m.

The agreement follows a Memorandum of Understanding signed in Shanghai on 29 March 2002 between the two companies in the presence of the Belgian prime Minister Guy Verhofstadt and the Mayor of Guangzhou, Yuan He Lin.

"This transaction further extends Interbrew's involvement in the Chinese beer market, and marks another successful step in the implementation of Interbrew's vision and strategy in this important market," Interbrew said in a statement.

The deal comes only days after Interbrew announced that it had acquired a 70% stake in KK Brewery, based in China's eastern province of Zhejiang, for $42m.

Zhujiang is China's fifth largest and most profitable brewer per hectolitre sold.

Interbrew will be one of the seven promoters in the transformation of Zhujiang into a Joint Stock Company, which is the first step in the process of Zhujiang's initial public offering, scheduled for 2004. Interbrew will become the second largest shareholder in the company and have two seats in the Board of director of the company.

With a market share of 50%, Zhujiang is the market leader in the southern Chinese province of Guangdong, one of the most prosperous provinces of China. Its sales volume in 2001 amounted to 7 million hectolitres.

The company is one of the few Chinese brewers whose beers are consistently available outside their own provincial market. Its leading brand is "Zhujiang" beer.

"We are pleased to welcome Interbrew as a shareholder in our company." said Rong Ming YANG, president and general manager of Zhujiang. "The combination of Interbrew's international standing and expertise in the brewing industry with our experience as a local operator will create a new momentum for our company in the Chinese beer market."

"Our longstanding partnership with Zhujiang has now crystallised in this shareholding agreement, which allows us a 24% stake at an EBIT multiple of 7 and a price of US$20.7 per hectolitre." said Hugo Powell, CEO of Interbrew. "This is a win-win transaction for both companies and we are looking forward to sharing our IPO experience, our international distribution capabilities and our marketing know-how with our Chinese partner."

"After 18 years of cooperation it is a natural step for Interbrew and Zhujiang to move into a new phase of their relationship." said Patrice Thys, Member of the Corporate Committee and Regional President China of Interbrew. "The combination of our strong management in Nanjing (who delivered a 66% sales increase over the past nine months compared to the same period in 2001), our recently acquired operation in Ningbo and this partnership with Zhujiang, will allow Interbrew to further develop its platform in China."

Interbrew is gradually expanding its presence and involvement in the southern and eastern part of China. Its relationship with Zhujiang dates back to 1984 when Interbrew assisted Zhujiang in the construction of its new brewery. Since then Interbrew has been providing the transfer of technical and brewing know-how, and has thus developed a close relationship with Zhujiang, as well as a good understanding of the fundamentals of the Chinese beer market. In 1997 Interbrew acquired the Nanjing Brewery, becoming an operator in the Chinese market.

Then last week, Interbrew acquired a 70% share of K.K. Breweries, the leading brewer in the Province of Zhejiang, located in the city of Ningbo.