The strategy is certainly ambitious. A-I China Breweries, an entity 80 per cent held by Asahi and 20 per cent by Itochu, will pay cash to acquire a 50 per cent equity interest in Tingyi-Asahi-Itochu Beverages (TAI), a newly incorporated holding company with 100 per cent interests in 13 beverage subsidiaries previously owned by Tingyi.
The transaction values TAI at €747 million based on enterprise valuation. The completion of the transaction is subject to the successful reorganisation of Tingyi's beverage subsidiaries and shareholders' approval.
China's beverage market has attracted a great deal of interest from foreign manufacturers. The country's beverage market has been growing at an average rate of 15 per cent per annum since the early 1990s, and the market size in 2002 had doubled in value since 1997. This ranks the Chinese drinks market as one of the most dynamic in the world.
On the product front, the Chinese market has seen a vibrant growth in a broad range of beverage products, such as tea and juices, where Tingyi respectively ranks number one - 45 per cent - and two - 20 per cent - in terms of market share. The partners say that they will seek to develop the company into a beverage giant to further take advantageof the growing demand and rising household income in China.
"We are truly excited to team up with two successful Asian business leaders which have demonstrated long-term commitment to China," said Tingyi chairman Ing-Chou Wei. "They will provide the important resources for us to build the requiredscale and core competency to better compete in an increasingly crowded market. We areconfident this is a value maximizing transaction for our shareholders."
Tingyi is the largest packaged food producer in China with sales of €865 million in 2002.It is principally engaged in the research, development, manufacture, distribution and sale of instant noodles, bakery products and beverages. The company's beverage division consists of thirteen plants around China, with a €282 million turnover in last year.
Asahi is a leading Japanese manufacturer of alcoholic beverages. The company has been actively pursuing expansion into other countries in Asia, North America and Europe and since 2001 has focused on China as the engine for future growth. Asahi believes that its investment in TAI will enhance its presence its presence in the country and represent a major milestone in the development of its international business.