Blog: Chris Brook-CarterAB's (Har)bin shopping with its pocket money

Chris Brook-Carter | 4 June 2004

When Anheuser-Busch announced its takeover bid for Harbin Brewery this week to rival SABMiller’s, a few eyebrows were raised at the price AB was offering.

AB offered US$5.58 per share for the Chinese brewer, beating SABMiller’s earlier offer by almost 30%. Suffice to say, SABMiller decided not to proceed any further and said it would accept AB’s offer for hte share it already owned in Harbin.

The South China Morning Post quoted the chairman of China Resources Enterprise - SABMiller's Chinese partner - as saying that the takeover battle defied business logic. “Suddenly, all parties have changed their views on the mainland beer market after foreign investors deserted it five years ago,” Frank Ning Gaoning said. “I don't know how foreign firms calculate the return on their assets. They must be using a long-term perspective.”

Although China Resources is now Harbin’s principal domestic rival, Gaoning may have a point – 30% is quite a mark-up from SABMiller’s bid.

One aspect to bear in mind, however, is the position of the protagonists involved – the big boys have come out to play and they’re using their loose change, relatively speaking.

In a note this week, Mark Swatzberg, an analyst at Legg Mason voiced the following opinion: “We are hard-pressed to justify the offer's premium to AB's valuation and the price at which Harbin shares closed on Monday. But,” he added, “(we) view the near-term value destruction as limited because this is not an enormous financial transaction for AB.”

Oh, to have that kind of money.


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