China Resources Beer Co, a State-controlled brewer, announced Wednesday that it has agreed to buy SABMiller's 49 percent stake in their joint venture - China Resources Snow Breweries (CR Snow) - for $1.6 billion, according to a filing the company sent to the Hong Kong Exchanges and Clearing Ltd.
If the deal is approved by Chinese regulators, CR Snow will become a wholly owned subsidiary of China Resources, which already holds a 51 percent stake, China Resources said in the filing.
The proposed deal is subject to regulatory approvals from the State-owned Assets Supervision and Administration Commission of the State Council, China's cabinet, and the completion of a major merger deal between SABMiller and Anheuser-Busch InBev (ABI), according to the filing.
SABMiller and ABI announced in November 2015 that they had agreed on a proposed acquisition by ABI of SABMiller for nearly $104 billion, a deal that will create a giant beer company that could generate annual -revenue of about $64 billion and account for about 30 percent of beer sales worldwide, The New York Times reported on Tuesday.
The SABMiller-ABI acquisition deal is still under review by the Ministry of Commerce for compliance with the Anti-Monopoly Law, according to the China Resources' filing.
"Selling a stake in CR Snow to China Resources will -definitely help SABMiller to appease -regulators and gain approval for the much bigger deal with ABI," said Yan Qiang, an industry analyst at Beijing-based Hejun Consulting Ltd.
However, the main reason SABMiller is selling its stake in CR Snow is to maintain profits in a declining Chinese beer
market by focusing more on higher-priced beer brands, which fare better in the market, Yang told the Global Times on Wednesday.
Although China is the world's largest beer market by volume, sales are declining because of lower consumption "as a result of the overall economic climate" and the rise of popularity of alternatives such as wine among Chinese consumers, according to Yang.
The deal is also a "good one" for China Resources, which aims at increasing its market share, because CR Snow is a "very valuable" brand and still has great potential to grow, according to Yang.
The CR Snow joint venture was formed by China Resources and SABMiller in 1994, and it is the largest beer producer in China. Its Snow beers is the world's best-selling brand, the Beijing-based China Times newspaper reported on Wednesday.
