Deals

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Japan's beer makers haven't had the best time of it in their push overseas. But extricating themselves from international forays may prove equally challenging, as Asahi Group Holdings Ltd. could be about to find out.

Japan's biggest brewery said Thursday it has started evaluating a potential transfer of all or part of its 20 percent stake in China's Tsingtao Brewery Co.

Asahi, which last year agreed to buy SABMiller Plc's central and eastern European assets from Anheuser-Busch InBev NV, is in deleveraging mode in Asia. In June, it said it was selling a stake in a Chinese beverage joint venture, partly to pay for the European purchases, and earlier this month announced plans to sell stakes in two unlisted Indonesian beverage companies to a local partner.

Shares in both Asahi and Tsingtao jumped on Friday.

Getting out of China won't be easy. Asahi paid about HK$5.2 billion ($666 million) for its Tsingtao interest in 2009; eight years on, the stake is worth around $1.2 billion, and the brewer's stock has lagged the broader market.

Under the Weather
Tsingtao shares have lagged rivals and the broader Hong Kong market
Source: Bloomberg

Tsingtao's net income also shows little sign of picking up. While Tsingtao remains one of China's most popular, and oldest, beer brands, tastes are changing. The company does offer premium brands but those beverages haven't caught on as well with affluent mainlanders keen on foreign brews. Asahi has also had little success getting traction in China for its top-selling "Super Dry" brand. On the flip side, its other beers are too expensive for the average Chinese worker.

Your Shout
Tsingtao was No. 2 in China's beer market last year
Source: Daiwa Capital Markets

Asahi itself has acknowledged that its 20 percent share in Tsingtao doesn't give it much clout. In January, President Akiyoshi Koji said that "ownership without control doesn't make much sense," essentially laying out the challenge for any prospective buyer. Local players, meanwhile, such as China Resources Beer Holdings Co., maker of the No. 1 selling "Snow" brew, would have a tough time convincing antitrust regulators they're not cornering the market.

This is a transaction that's been in the works a while. Although an official announcement came this week, Bloomberg News reported as far back as January that Asahi had picked Morgan Stanley to advise on the stake.

Tsingtao investors, who pushed the company's Hong Kong-traded stock up as much as 6.8 percent on Friday, look like they're getting ahead of themselves. There's a reason the shares lost 16.5 percent last year and 33 percent the year before that. A hangover that takes that long to lift is severe indeed.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net