Tsingtao Jin Quits Two Weeks After Investor Share Sale

Tsingtao Brewery Co. (600600), China’s second-largest brewer by market share, reported the resignation of its chairman less than two weeks after an investor sold a block of shares 7 percent below market price.

Chairman Jin Zhiguo resigned for health reasons and had no contact with the investor before the share sale, Tsingtao said in two separate stock exchange filings yesterday. Jin will be replaced by President Sun Mingbo, the company said.

Tsingtao, based in the coastal city of Qingdao in Shandong province, in March pledged to boost growth by expanding capacity, developing new products and seeking acquisitions. The stock has dropped in Hong Kong this month as one of the company’s investors, billionaire Chen Fashu, agreed to sell shares in the company at a discount.

Tsingtao plunged 7.8 percent, the most in two years, on June 19 as Chen offered 32 million shares at HK$47 apiece, 7 percent less than the previous closing price of HK$50.55, according to a copy of a term sheet obtained by Bloomberg. Tsingtao yesterday said the company “did not have prior knowledge” of the sale and that Jin has confirmed he had no contact with Chen before the stake reduction.

The stock dropped 1.3 percent to close at HK$44.05 in Hong Kong trading. The shares, suspended in Hong Kong since June 27, resumed trading today. The board has agreed to give Jin the title of “honorary chairman,” the company said.

“Given the long tenure Mr. Jin had with the company, and the crucial role he played in crafting out its strategy and development, his step down will likely weigh negatively on sentiment, at least in the short term,” Bank of America Merrill Lynch analyst Tina Long wrote in a note to clients.

Profit Increase

Tsingtao, founded by German settlers more than a century ago in Qingdao, reported a 14 percent increase in 2011 profit on demand for alcoholic drinks in the world’s most populous nation.

Jin has held roles at Tsingtao including general manager and president, according to the company’s annual report. He became president in 2001 and chairman in 2008. Jin is a member of China’s National People’s Congress, the report said. He quit because he needs “systematic treatment for personal health reasons,” the company said.

China’s brewers are battling rising competition and higher expenses. Tsingtao in March said it faces challenges this year that include a “weak global economy, slowing domestic consumption growth, and rising human-resources costs.” Profit margin at its core businesses narrowed to 33.4 percent from 35.2 percent a year earlier as raw material costs increased, the company said in March.

China Resources Enterprise Ltd. (291), which makes Snow beer through its joint venture with SABMiller Plc (SAB), had a 22 percent share of the China beer market in 2011, according to data from Euromonitor International. Tsingtao was second with a 14 percent share.

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

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