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APB Restructures China Investments To Focus On International Premium Brand Strategy

Divests HAPBC’s 49% stake in Jiangsu Dafuhao and ownership of Shanghai-based brewery
Intensifies International Premium Brand Strategy Across China
Underlines commitment to the China beer market with further expansions at breweries in Guangzhou and Hainan

Forging ahead with its premium brand strategy in China, Asia Pacific Breweries Ltd (APB), together with Asia Pacific Investment Pte Ltd1, is divesting its stakes in Jiangsu Dafuhao Breweries Co., Ltd (DFH) and Shanghai Asia Pacific Brewery Company Limited (SAPB) via the sale of all the issued shares in Heineken-APB (China) Pte Ltd2 (HAPBC) to China Resources Snow Breweries Limited.

The proposed RMB870 million transaction (equivalent to approximately S$162 million) excludes its beer brands, Tiger, Heineken and Anchor; as well as the following entities:

i. Guangzhou Asia Pacific Brewery Co Ltd;

ii. Heineken APB (China) Management Services Co. Ltd;

iii. Hainan Asia Pacific Brewery Co. Ltd; and

iv. Heineken Trading (Shanghai) Co Ltd.

The sale price represents a gain of approximately S$46.6 million after deducting related expenses. By virtue of its 50% stake in HAPBC, APB’s share of the gain on disposal is approximately S$23.3 million.

The rationalisation is aligned with the Group’s plan to take its international premium brands, Tiger and Heineken, to yet another level of success in the world’s largest beer market and to ensure the optimisation of its production capacities in China.

Elaborating, Mr Roland Pirmez, Chief Executive Officer, APB said, “The three key pillars of our international premium brand strategy comprise a distinctive portfolio of international beer brands; strategic marketing and extensive distribution; and optimal production facilities. As DFH and SAPB do not align with this strategy, it only makes business sense for us to divest both assets. Going forward, we shall further optimise our production capacities in Hainan and newly-commissioned brewery in Guangzhou to cater to the demand for our beers in China."

The international premium brand strategy is designed to ride on rising affluence, growing urbanisation and increasing consumer sophistication in China. In 2010, China consumed 448 million hectolitres of beer, 6.3% higher than the year before. Its 12-million hectolitre premium segment has benefited from this trend of premiumisation, resulting in an increasing desire for fine quality international beers.

To capitalise on the opportunities and secure a national presence across China, APB has established an extensive sales and regional network in most parts of China. Complementing this is its strategic marketing that leverages the strong brand equity and international success of Tiger and Heineken while beer supplies will be tapped from the breweries in Hainan and Guangzhou.

To fulfill strong demand for Tiger and Heineken which have been experiencing double-digit growth as well as to ensure the supply of beers nationwide, the Group is expanding production capacities in Hainan and Guangzhou to 2 million and 1.5 million hectolitres respectively. The developments will mark a 33% increase in production capacity at the Hainan brewery while that of the newly-commissioned Guangzhou brewery will improve by 50%.

The transaction is expected to complete in approximately three months.

1Asia Pacific Investment Pte Ltd is a 50-50 joint venture between the Heineken group and Fraser and Neave, Limited.

2 Heineken-APB (China) Pte Ltd is a 50-50 joint venture between APB and Asia Pacific Investment Pte Ltd

14 Jul. 2011

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