Sept. 21 (Bloomberg) -- Shares of Tsingtao Brewery Co. surged in Shanghai after the parent of China's largest beermaker increased its compensation offer to minority investors by a third in exchange for making all the company's shares tradable.

The yuan-denominated shares jumped by their 10 percent daily limit to 12.44 yuan as they resumed trading for the first time in more than three weeks after being suspended while the company's state-owned major shareholder formulated its offer.

Tsingtao Brewery, 27 percent owned by Anheuser-Busch Cos., is joining a government program to convert more than $250 billion of non-tradable stock into shares that can be bought and sold on exchanges. The beermaker needs the approval of minority shareholders, which include The Bill & Melinda Gates Foundation and Merrill Lynch & Co., to carry out the conversion plan.

The Qingdao State-owned Assets Supervision and Administration Commission, Tsingtao's controlling shareholder, plans to offer 1.79 bonus shares and 2.4 yuan in cash for every 10 held by minority investors, the listed company said yesterday. The offer, which is equivalent to 2 shares per 10 held, was increased from 1.5 shares offered in a Sept. 11 statement.

Tsingtao Brewery's yuan shares have jumped 50 percent this year, matching the increase in the benchmark Shanghai Composite Index. The company's Hong Kong-traded shares rose 4.2 percent to close at HK$10.48 and have gained 28 percent this year.

Stake Dilution

Shareholders are scheduled to vote on the compensation plan on Oct. 12, according to Tsingtao Brewery's earlier statement.

The Bill & Melinda Gates Foundation, Merrill Lynch and Deutsche Bank AG held a combined 40 million yuan-currency shares of Tsingtao, or 3 percent of the company's total shares, by the end of June, according to Tsingtao's earnings report.

The brewer said on Aug. 31 its controlling shareholder planned to buy a 2 percent stake from China Orient Asset Management Corp. as part of its plan to facilitate the share reform proposal. The purchase would bring the commission's total stake to 32.6 percent, it said.

Tsingtao Brewery's major shareholder is still offering less compensation to its minority investors than rivals.

Beijing Yanjing Brewery Co., China's third-biggest brewer, in April offered investors 2.7 free shares for every 10 held in exchange for the right to make all its shares publicly tradable. Chongqing Brewery Co., which is 19.5 percent owned by Scottish & Newcastle Plc, brewer of John Smith's and Kronenbourg beers, in July offered investors 2.4 free shares for every 10 held.

A three-for-10 stock offer by Tsingtao Brewery would dilute the Qingdao state-owned assets commission's stake to 28.3 percent, still bigger than the 27 percent interest held by St Louis-based Anheuser-Busch, the world's largest brewer, according to an estimate by Adam Zhou, a beverage analyst at KGI Asia in Shanghai.

China's state-owned shareholders need to provide compensation to minority investors for any losses caused by the increase in supply of tradable stock. China's government is trying to make companies more accountable to shareholders and to bring its stock markets more in line with international practices.

To contact the reporter for this story: Jianguo Jiang in Shanghai jjiang@bloomberg.net.

Last Updated: September 21, 2006 04:50 EDT